Exchange Traded Funds: Q1 2021 Market Overview

The first quarter of 2021 has seen a continuation of the strong inflows seen at the end of 2020 throughout the Global ETF industry. Fund flows topped $100 billion in each month, with new assets peaking at $130 billion in February, bringing the quarterly total up to $349 billion.

Equity ETFs drove the majority of investment once again with 83% of inflows (up from 76% in Q4 2020). Core Broad Market ETFs topped the tables in dollar amounts, with Vanguard S&P 500 ETF (VOO), Vanguard Total Stock Market ETF (VTI), and iShares Core S&P 500 ETF (IVV) making up the top three. In contrast, the SPDR S&P 500 ETF (SPY) featured within this quarter's largest outflows. Notable entrants in the top 10 were the Financial Select Sector SPDR Fund (XLF) at 54% quarterly growth and two emerging market focused funds, iShares Core MSCI Emerging Markets ETF (IEMG) and Vanguard FTSE Emerging Markets ETF (VWO).

Many of the ETFs within our top 10 fund outflows are associated with negative economic outlooks implying that investors have been bullish going into the new year. These include traditional safe haven asset classes such as SPDR Gold Shares ETF (GLD), and ETFs designed to provide minimum downside risk such as iShares MSCI USA Minimum Volatility Factor ETF (USMV) and SPDR Consumer Staples Select Sector ETF (XLP). Core Fixed Income ETFs also feature heavily within the outflow list, although Fixed Income as a wider asset class had $54 billion of new investment. iShares Core Total USD Bond Market ETF (IUSB) was also the largest quarterly flow as a percentage of AUM within our top 10.

ARK Innovation ETF was our largest actively managed ETF by AUM growth percentage in our top 10 at 30% and saw one of the biggest product launches with the much-publicized ARK Space Exploration ETF (ARKX) attracting $344 million of AUM after two days of trading.

Thematic ETFs dominate our new launches list this quarter making up 5 of our top 10 by AUM. VanEck Vectors Social Sentiment ETF (BUZZ) with $356 million AUM and L&G Hydrogen Economy UCITS ETF (HTWO) with $300 million AUM are the other two notable examples of Thematic launches drawing attention from investors as ETF issuers look to capitalize on the increased business cycle volatility and changing consumer habits as a result of the ongoing Coronavirus pandemic.

Overall Thematic and ESG Equity flows were just above $30 billion for the quarter, representing a 19% increase in overall AUM from the end of 2020 and a year on year increase in new assets of 291%. These two fund categories have clearly been identified as key strategic growth areas for ETF issuers within crowded US and European marketplaces. Thematic ETFs also feature within the top funds by quarterly NAV total return with Amplify Blockchain Leaders ETF (BLOK) leading performance with 60% return, closely followed by ETFMG Alternative Harvest ETF (MJ) and Invesco Elwood Global Blockchain UCITS ETF (BCHN). ETFs focusing on energy, financial, and home-building also fared well as markets priced in anticipated economic growth in 2021.

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Thomas Runciman, Senior Associate, ETF Data Solutions

Thomas.Runciman@ihsmarkit.com

S&P Global provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation.

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.