A historic surge of cash has swept into exchange-traded funds, spurring asset managers to launch new trading strategies that could be undone by a market downturn.
This year’s inflows into ETFs worldwide crossed the $1 trillion mark for the first time at the end of November, surpassing last year’s total of $735.7 billion, according to Morningstar Inc. data. That wave of money, along with rising markets, pushed global ETF assets to nearly $9.5 trillion, more than double where the industry stood at the end of 2018.
Most of that money has gone into low-cost U.S. funds that track indexes run by Vanguard Group, BlackRock Inc.
BLK,
and State Street Corp.
STT,
which together control more than three-quarters of all U.S. ETF assets. Analysts said rising stock markets, including a 25% lift for the S&P 500 this year, and a lack of high-yielding alternatives have boosted interest in such funds.
“You have this historical precedent where you have tumultuous equity markets, and more and more investors have made their way to index products,” said Rich Powers, head of ETF and index product management at Vanguard.
An expanded version of this report appears at WSJ.com.
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