In a crucial year for the ETFs and indexing, BlackRock Inc.'s iShares division, of which it is the leader, expanded at a faster pace than ever, with record inflows of 246 billions of dollars, bringing the global ETF industry to more than $4,5 trillion in total assets under management for the first time.
iShares' growth has been driven by increased interest from investors looking for both quality core investments and exposure to more targeted funds, which offer innovative new ways to access the markets.
Key moments in 2017 for iShares
- iShares AUM ended the year at $1,754 trillion, including $1,33 trillion in equities and $427 billion in fixed income and commodities-related securities.
- iShares in the US posted record growth, with net inflows of $201 billion. US investors and financial advisors have seen exceptional growth this year as the move to paid wealth management has encouraged the use of low-cost portfolio instruments. Institutions have increased the use of iShares ETFs across asset classes as well as in tactical and buy-and-hold portfolios.
- The European UCITS iShares, purchased by European, Asian and Latin American investors, saw organic growth of 15%, posting record net inflows of $41 billion. This year, iShares Europe exceeded $300 billion in AUM, ending the year at $359 billion.
- iShares fixed income ETFs have benefited from the fact that a growing number of investors view bond ETFs as an integral part of a modern bond portfolio. The use of bond ETFs as trading instruments has expanded as bond markets have continued to evolve from exclusively over-the-counter trading, to broker-dealing, to more open, all-to-all networks. -all". Net inflows of iShares fixed income products grew at a pace of 13%, with more than $68 billion in new inflows. Bond ETFs are on track to reach $1,5 trillion by 2022.
- iShares Core global funds grew from $500 billion to $514 billion in AUM, a 58% growth rate, adding a record $123 billion in global net inflows driven by the pursuit of value and quality from part of retail and institutional investors for their long-term fund positions. In the US, iShares Core increased its market share to 41%, totaling $105 billion in inflows for the year.
- The iShares Core range has raised $273 billion since the range's launch in 2012.
- Institutions have continued to enhance the use of iShares ETFs as financial instruments, alongside swaps, futures and single-name securities, as well as as a reference asset for OTC and listed derivatives.
- iShares continued to be the market leader in factorial and smart beta products, as investors globally tend to view the factor approach as a more deliberate strategy in portfolios. Currently, iShares boasts a global range of 142 smart beta ETFs with a peak AUM of $108 billion.
Mark Wiedman, Global Head of iShares and Index Investments of BlackRock, he said: “Tens of millions of investors and institutions have chosen iShares ETFs to invest with simplicity, ease, decision and low cost. “We expect the global ETF market to reach more than double its current assets under management by 2022. There are three global trends expected to drive this growth: fee-based asset management, online bond and derivative trading, and the pursuit of alpha by active funds and asset managers.”
Stephen Cohen, Head of iShares EMEA at BlackRock, said: “As the impact of MiFID II reverberates across the region, we believe the European ETF industry is about to enter a new phase of growth. Our European range remains the benchmark for investors looking for both broad market exposures for core portfolios and tactical tools for managers to adjust portfolio return profiles. In 2017, we remained ultra-focused on giving investors greater investment flexibility, developing a package of 35 currency hedged and dividend-paying share classes, launching market-first products such as the Global Aggregate bond fund at physical replication and helping clients exploit economic development opportunities with our Robotics ETFs.”
Emanuele Bellingeri, Manager for Italy of iShares (BlackRock) commented: "In Italy the ETF market in 2017 showed very positive signs, in particular for iShares it marked an organic growth of assets exceeding 15%". Looking forward, we believe the introduction of MIFID II will be an important catalyst for the transition to ETFs and broader indexing strategies. We expect the adoption of ETFs by institutional investors and the emergence of fee-based advisory services for retail investors to accelerate significantly, in light of the greater awareness of the benefits of index products in terms of efficiency, transparency and flexibility in implementation of short- and long-term investment strategies.”
