Top two swap places in global net flows leaderboard but closest competitors suffer
After spending the previous two years in second place, BlackRock's iShares exchange-traded fund division has defeated Vanguard to take up the top spot on the worldwide ETF net flows leaderboard last year. However, the top two also solidified their duopoly in the ETF sector, as State Street Global Advisors and Invesco—their closest competitors—suffered even worse losses as a result of the gloomy market climate.
"BlackRock and Vanguard were “almost neck and neck, and then you have got these up-and-coming ETF firms that are benefiting from either active management or styles that were in favour — defensive or income [generating] in particular," Todd Rosenbluth, head of research at consultancy VettaFi, told the Financial Times.
Investment firms located in Europe and Asia also performed significantly worse than their US counterparts, with weaker inflows and quicker decreases in assets under management, while actively managed ETFs, a rapidly expanding market specialty, led the winners' list.
According to Morningstar statistics, iShares saw net inflows of $221 billion in 2022, a decline of 28.3% from a record $308 billion in 2021. This occurred during a year in which total worldwide ETF inflows decreased by 32.8%, from $1.29 trillion to $867 billion.
iShares' greater flow dynamics, according to Kenneth Lamont, senior fund analyst for passive strategies at Morningstar, may have indicated that more investors were seeking market exposures that weren't available by the relatively limited selection of Vanguard ETFs.
It's possible that the slightly different clientele of the two major players—Vanguard being more oriented toward retail and wealth management and iShares being more well-liked by institutional investors—also played a role.
However, the third- and fourth-ranked providers by assets, SSGA and Invesco, fared much worse, with net flows falling by 71.9% and 55.7%, respectively, to $29.2 billion for each company.
Charles Schwab, the fifth-largest ETF company, fared better, with only a little fall in both flows and assets.
Thanks to the conversion of some of its mutual funds to ETFs and the increased demand for active ETFs, JPMorgan was able to expand its ETF assets by 24.6% to $99.8 billion and climb into the top 10 of the worldwide rankings. These circumstances also benefited Dimensional Fund Advisors, whose assets increased by 60% to $72.4 billion.
ProShares saw a 42.8% uptick in inflows to $15 billion and Direxion saw a 729% increase to $11 billion due to investors' interest in leveraged and inverse products last year. However, both companies' assets declined because their geared products typically delivered sharp losses, at least for those who held them for an extended period.
European and Asian-owned issuers made up the majority of the losses from last year. Nomura, Amundi, Xtrackers, Nikko, Daiwa, UBS, MUFG, Global X, and Pimco, the top nine institutions, all saw major drops in assets and flows, with flows turning negative for five of them.
“Passive investing is a scale game and the relative success of some of the larger US ETF managers relates to their size and breadth of offering both in the US and in other large markets such as Europe,” Lamont said.
