As 2014 drew to a close, a couple of major research firms took a look at where most of the action was happening in the exchange-traded fund (ETF) world.
The Financial Times teamed up with financial data provider Markit to examine ETF flows in Europe and the U.S. Their data found investors scrambling to get a piece of the economic recovery in the U.S.—international flows into ETFs with exposure to the U.S. were equivalent to around 50% of starting assets under management—and the strongest since 2008.
The popularity of the U.S. isn’t at all surprising. With decent numbers around employment and economic growth, the country is one of the few bright spots in the global economy.
However, as the Times research finds, the popularity of U.S. exposures comes as ETF investors begin to doubt the prospects for European economies. Inflows into European ETFs have faded in recent months, although a few countries managed to attract more investors, says Markit. Spanish ETFs showed the strongest growth in 2014; Italian ETFs also experienced rapid expansion. Russia also got investors excited, even in the midst of the Ukraine crisis and falling oil prices.
Germany experienced big outflows.
The Financial Times data was reinforced by data from research firm Lipper, which was highlighted in this Wall Street Journal article. Notably, according to Lipper, as of Christmas Eve, U.S. stock ETFs had gained more than US$143 billion in inflows during the year, blowing past last year’s record of $137 billion.
All told, total assets in U.S. ETFs passed $2 trillion for the first time. As investors turned their attention to the U.S., they tended to shun the volatility coming out of emerging markets; they also pulled out of gold. According to the Wall Street Journal, iShares MSCI Emerging Markets ETF and the SPDR Gold ETF were among the funds hit by the biggest outflows last year.