BlackRock iShares says the record trading volume achieved by the its ETF products in 2018 show the versatility of the product during a period huge market volatility.
In total, iShares saw $7.3trn of ETF shares traded in the US and Europe combined in 2018, up 42% on the previous year. The product suite attracted a net incoming assets figure of $167bn.
Moreover, the momentum of trading peaked in the further quarter at $81bn, at a time when the markets were under a period of significant stress.
"Investors around the world used ETFs to capture alpha, manage risk, invest sustainably, and tap liquidity in tighter financial conditions," said Mark Wiedman, global head of iShares and index investments at BlackRock.
"ETFs are now established as natural parts of every investor's portfolio."
"When flows and assets increase during periods of volatility and market downturn, it sends a powerful message: investors prefer iShares ETFs as liquid, low-cost, and transparent market access vehicles" added Carolyn Weinberg, managing director and global head of product at iShares.
"We have particularly seen significant flows into factors and fixed income ETF products from investors building more resilient portfolios."
BlackRock pointed out that the robust flows of iShares ETFs during a year of broad declines in stock and bond prices point to the resilience and expanding usage of ETFs globally, both as investment vehicles and market tools.
The company also noted that iShares ETFs saw a notable increase in adoption as proxies for their underlying securities, a trend that was particularly evident during periods of market stress, suggesting iShares ETFs added liquidity "just when it was needed."
The data would also suggest a significant maturing of the European ETF marketplace with more than $2trn of industry trading volumes over the course of the year showing that investors are now viewing European ETFs as an efficient and liquid way to invest.
iShares maintained its position as an industry leader in Europe, capturing 45 percent of industry flows.
E to the S to the G
Notably, iShares in Europe demonstrated notable successes in 2018 in sustainable investing, seeing over $1bn of inflows over 2018 while the thematic range reached $4bn in assets.
Flows into iShares sustainable ETFs reached $3bn globally and indeed sustainable iShares ETFs led the industry in terms of growth year-on-year at 52%. BlackRock said it believes sustainable ETFs are at an inflection point, with assets under management (AUM) for the industry projected to reach more than $400bn by 2028, from $25bn today.
Commenting on the figures, Stephen Cohen, head of iShares EMEA at BlackRock, predicted that ETFs in Europe would make up circa 50% of the average portfolio in the next few years. This is from around the 10% level currently.
"Across the region, technology and regulation are driving structural change in the form of cost sensitivity in the wealth industry and transparency of trading for institutional investors," he said. "In parallel, investors are broadening how they invest, fueling trends such as sustainable and thematic investing. These factors play squarely into the characteristics and choice afforded by ETFs and index funds."
iShares was the top asset gatherer in 2018 across major markets and strategies, with net global inflows equating to 32 percent of the net figure of $515bn. Moreover, the company said it set new monthly records towards the end of the year with flows of more than $29bn in November and $44bn in December.
Another fast-growing area is fixed income and again BlackRock boasts market leadership in terms of flows, at $50bn for 2018, and asset under management which hit $428bn at the end of the year.
The company said that among market segments, the greatest share during 2018 went to short-duration and high-quality bonds, as investors globally sought to offset equity risk, generate income and hedge against rising rates.
Industry flows into bond ETFs, meanwhile, hit $131bn globally, with a total AUM of $878bn. iShares projects that total global bond AUM will surpass the $1trn figures by next year.
