ETFGI reports the global ETF/ETP Industry was 847 billion US dollars larger than the global Hedge Fund Industry at the end of Q1 2017
LONDON — May 18, 2017 — ETFGI, a leading independent research and consultancy firm on trends in the global ETF/ETP ecosystem, reports today that the global ETF/ETP industry with US$3.913 trillion in assets at the end of Q1 2017 was US$847 billion US dollars larger than the global Hedge Fund Industry which had assets of US$3.066 trillion at the end at the end of Q 2017 (based on ETFGI and HFR data).
The assets invested in the global ETF/ETP industry have continued to grow faster than assets in the global hedge fund industry since the end of Q2 2015 when the assets invested in the global ETF/ETP industry first surpassed the assets in the global hedge fund. This was a significant achievement as hedge funds have existed for 67 years and ETFs for just 27 years with the first ETF being listed in Canada on March 9, 1990.
Gates Capital Management's Excess Cash Flow (ECF) Value Funds have returned 14.5% net over the past 25 years, and in 2021, the fund manager continued to outperform. Due to an "absence of large mistakes" during the year, coupled with an "attractive environment for corporate events," the group's flagship ECF Value Fund, L.P returned 32.7% last Read More
Although the assets in ETFs were larger than the assets invested in hedge funds the hedge fund industry remains larger than the ETF industry based on number of funds: 8,216 hedge funds vs 6,771 ETFs/ETPs at the end of Q1 2017 as shown in the chart below.
Our an analysis of net new asset flows show investors have preferred allocating to ETFs/ETPs over hedge funds since 2010. During 2016 and in Q1 2017 hedge funds suffered net outflows of US$70.1 billion and US$5.5 billion while ETFs/ETPs gathered net inflows of US$390.4 billion and US$197.2 billion during the same time periods.
Many investors that have invested in hedge funds with the goal of receiving higher returns have been disappointed. In Q1 2017 the performance of the HFRI Fund Weighted Composite Index at 3.09% was significantly lower than the return of the S&P 500 Index at 7.15. Since 2010 in each year the HFRI Fund Weighted Composite Index return was significantly lower than the return of the S&P 500 Index.
The ETF structure offers intraday liquidity, transparency, small minimum investment sizes and at costs that are lower than many other investment products, including futures in many cases. According to our research the asset-weighted average annual cost for ETFs/ETPs is 27 basis points or less than one third of a percent, while fees charged by the majority of hedge funds are 2% of assets and 20% of profits.
This situation has benefited the ETF/ETP industry which offers an enormous toolbox of index exposures to various markets and asset classes, including hedge fund indices, listed real estate, infrastructure, private equity, smart beta indices, fixed income and commodities as well as some actively managed ETFs.
The 2017 ETFs Trading and Market Structure Conference organised by Ari Burstein, Kreab and Deborah Fuhr, ETFGI will be held on June 7, 2017 in New York City. The conference will focus on regulatory and technological developments in the markets impacting the trading of ETFs.
Keynote speakers include: Adena T. Friedman, President and Chief Executive Officer, Nasdaq; a “fireside chat” with Chris Concannon, President and Chief Operating Officer, CBOE Holdings and Jim Ross, Executive Vice President, State Street Global Advisors (SSGA); and Tom Farley, President, NYSE Group. Panelists include senior representatives from all of the exchanges, major broker-dealers and market makers, ETF issuers, law firms, as well as staff from the US Securities and Exchange Commission and FINRA.
Panel discussions will cover the following topics:
- Impact of Regulatory Developments on ETFs
- Exchange Roundtable – Competition for ETF listings
- Creating Better Trading Systems and Trading Tools for ETFs
- Understanding ETF Liquidity and the Active/Passive Debate
- New ETF Product Approvals and Bringing New ETFs to Market
Click here to register.
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