BlackRock, Vanguard Post Big Gains From Record ETF Inflows While State Street Loses Its Way

The global exchange-traded fund (ETF) industry witnessed incredible growth over the first four months of the year, with data compiled by ETFGI showing that investors around the world poured a record $108.8 billion in new cash into the extremely popular investment channel over the period. ^[1] This compares to inflows of $71.4 billion for the first four months of 2014. In fact, inflows for U.S. ETFs and ETPs (exchange-traded products) alone were an unprecedented $72.1 billion this time around. As a result, the global ETF/ETP industry swelled to a total size of $2.998 trillion by the end of April 2015.

BlackRock (NYSE:BLK) posted the highest gains among all ETF providers yet again, with the financial institution capitalizing on its position as the world’s largest asset manager as well as world’s largest ETF provider to report net inflows of $42.9 billion worldwide. ^[2] Vanguard, which moved past State Street (NYSE:STT) in Q1 2015 to become the second largest ETF provider in the world, maintained its brisk pace of growth with $31.5 billion in inflows. State Street’s woes, however, showed no signs of letting up, with the custody banking and asset management giant reporting outflows of $13.3 billion in April alone – taking its total outflow figure for the January-April period to $39.2 billion.

See our full analysis for BlackRock | State Street

The popularity of ETFs and other exchange traded products (ETPs) is evidenced by the fact that the industry has grown to nearly $3 trillion in size from being a largely obscure investment option at the turn of the century. ^[1] The reason for this growth is that ETFs provide investors a cheap and convenient way to put their money into fixed income, equity, currency, commodities and other investment markets. And with the popularity really only skyrocketing in the past few years, the industry has the potential to continue to grow considerably in the future.

With over $2.1 trillion in assets under management, U.S.-listed ETFs account for nearly 75% of all ETF assets globally. This is why the largest players in the U.S. ETF industry have a sizable share of the worldwide industry. ^[3] The table below uses data compiled by ETFGI as well as ETF.com, and details the assets under management for the three largest ETF providers globally as well as in the U.S. at the end of April 2015.

The table makes BlackRock’s strong position in the ETF industry quite clear, with the asset management giant accounting for more than 38% of the industry in the U.S. and 37% of the global market size. While State Street and Vanguard have a strong presence in the U.S., the small difference between their asset base for ETFs listed in the U.S. and those listed outside indicates that they have not gained much traction abroad. Notably, these three companies account for 80% of all ETF assets in the U.S. and almost 70% of all ETF assets worldwide.

Since BlackRock acquired its iShares line of ETFs from Barclays Global Investors in late 2009, the investment product has seen the fastest growth among all that the company has to offer. And the brisk growth pace is not expected to slow down any time soon. BlackRock’s ETF assets are roughly split in a 70:30 ratio between equity iShares and fixed-income iShares. We believe that equity iShares will be the single largest driver of value for BlackRock in the future, as we estimate a 10% annual growth in size of their assets over coming years. You can see how a faster or slower rate of growth in these assets affects BlackRock’s share value by making changes to the chart below.

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1. Assets in ETFs/ETPs globally reached a new record 2.998 trillion US dollars, ETFGI, May 8 2015 [↩] [↩]
2. Top 5 ETF and ETP providers ranked by global assets, ETFGI Website [↩]
3. U.S. ETFs, ETF.com [↩]