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This past year has all been about records for the ETF industry.  The exponential growth trajectory of the industry continued, as investors moved to using ETFs as their default investment structure.  A lot has been written in the press about the success of the ETF industry and the possibility of gross inflows for the US listed ETFs breaking above $1trn for the calendar year.  Whilst the final number is short of this milestone, the calendar year of 2021 was still a record year for gross inflows, surpassing the inflows for 2020.


These huge inflows occurred despite an environment where the global economy still operated under restrictions.  What is clear is that the flows weren’t just as a result of “new” money into investments but also as a direct result of switching from historic investment structures such as mutual funds (unit trusts). 

In the US alone the ETF industry is now a $7trn industry with a doubling of assets under management in just four years.


Another trend that has continued through this past year was the growth in Fixed Income ETFs.  The market crash that occurred as a result of the Covid pandemic and the total shutdown of global trade demonstrated the additional liquidity that is provided by the ETFs.  Whilst the bond market effectively froze as buyers dried up, ETFs continued to trade on the stock exchanges and thus in effect they became the “bond market” through that stressed period as they were the only place where buyers and sellers could conclude trades.  The Fixed Income ETF market is now just over 10% of the entire ETF industry.  A lot of this growth is driven by portfolio managers who have discovered if they use ETFs for their conservative asset allocations, they can just focus on stock selection and not have to worry about making decisions on currencies, bonds etc.


Talking about portfolio managers the predicted trend in this past year was the rapid expansion in the number of active ETFs.  These active ETFs don’t seek to replicate any specific index with the portfolio manager of the ETF still able to select what they are able to invest in, within the parameters of their mandate.

Most investors are familiar with the ARK Invest stable of ETFs managed by Cathie Wood.  These ETFs are actively managed as they don’t track any specific index.  She has had huge success with her ETFs and many active managers are now using the ETF structure as the product to house their investment solutions.  As evidenced in the chart from Bloomberg there were more actively managed ETFs launched than those passive ETFs that track indices.


The final thing we saw in the last year was the launch of the first Bitcoin ETF in the US.  Proshares Bitcoin Strategy (BITO) was launched in October 2021 and became the fastest ETF in history to reach $1bn in assets, reaching the milestone in just two days.

2021 was indeed a busy year for the ETF Industry but what can we expect to see for this year.  The easy answer is that we expect to see a continuation of the rapid growth that the industry has experienced.  The success of the ETF industry has meant that the majority of investments flows has gone into ETFs.  This in turn means that those asset managers who want to stay relevant launch their own ETFs and thus in turn, they grow the number of available ETF products.  Growth begets growth and the momentum just continues.


The large increase in the number of ETFs does create an increase in complexity.  It is no longer as simple as Warren Buffett once stated, “just buy the Vanguard S&P 500”.  There are ETFs to meet every single investment need and thus one needs to take the time to find the correct ETF – that ETF that will deliver the investors desired outcome, at the lower cost, without compromised liquidity.  We would expect that there will also be an increase in the number of ETF “experts” as this is still an under-researched area of the market.  Many financial planners don’t have a detailed knowledge of ETFs but they risk being getting left by the wayside. 




Magwitch Offshore is a leading provider of Global Balanced ETF portfolios with products in all major currencies. Magwitch utilises an advisor distribution model and their portfolios are available through offshore endowment structures provided by some of the larger Insurers.