In the past two years, against the backdrop of widespread financial outflows from central banks around the world, the demand for wealth management among global Christians has continued to remain strong.
For most non-professional investors, picking stocks and tracking the market for a long time are extremely painful, and it is difficult to make full use of their own knowledge and experience when buying bonds, traditional funds and other products. In the context of , ETFs have rich varieties, no need to choose stocks or , relatively low volatility, relatively low fees, and can capture excess returns. ETFs have been widely sought after by global investors in the past two years.
According to Morningstar (Morningstar) statistics, global ETF capital inflows this year exceeded the trillion-dollar mark for the first time at the end of November, far exceeding last year's capital inflows of US$735.7 billion. This historic influx of cash has pushed the total global ETF assets to nearly US$9.5 trillion, an increase of more than 100% from the end of 2018.
However, it is worth noting that the asset management industry has a "curse of scale" - scale is the biggest enemy of performance. Against the backdrop of record-breaking scale, can active ETF products with outstanding performance in the past two years break this curse?
Market darling ETF
ETF (Exchange Traded Fund), the full name of traded open-end index fund , is an open-ended securities investment fund product listed and traded on the exchange. In general, the main advantages of ETF are: low cost, high liquidity, diversified investment, wide range of targets, high transparency, and the ability to quickly and effectively transfer and hedge risks.
(1) The purchase cost of low-cost
ETF is mainly transaction commission, while OTC funds also require application and redemption fees, so ETFs usually have lower fees. At the same time, ETFs are more tax-efficient than over-the-counter funds in most countries around the world. Low-cost investment has ignited investor enthusiasm, causing the asset size of ETFs to continue to rise over the past 10 years. According to Bloomberg, the average fee for the top 20 fastest-growing ETFs operated by Vanguard and BlackRock is less than 0.1%.
(2) Diversified investment and wide range of targets
On the supply side, in order to attract more investors, major fund companies have created various active ETFs based on traditional index ETFs. not only provides investors with a wide range of Investment targets allow investors to have a higher degree of freedom to choose industries they are optimistic about, and can give full play to the stock selection and timing capabilities of professional investment institutions to capture more excess returns.
In the past two years, large asset management companies, long known for operating mutual funds , have actively responded to investors' rising enthusiasm for active ETFs and launched a large number of active ETF products. FacSet data shows that of the record 380 ETFs launched in the United States this year, more than half are active ETFs.
What’s more, many large U.S. asset management companies, including Dimensional Fund Advisors, even chose to convert some of their mutual funds into active ETFs to follow this trend. In this regard, Dimensional's co-CEO Gerard O'Reilly said:
"While providing a variety of mutual fund products, we should also provide many ETF options to allow investors to choose their own risks."
According to Bloomberg, Nowadays, many small and medium-sized asset management companies in the United States are actively creating various industry ETFs with narrow themes, and are moving around in the ETF market dominated by asset management giants, hoping to capture excess profits for investors that have been missed by the giants. For example, in early December, VanEck launched an ETF targeting the food industry; Tuttle Capital Management launched the FOMO ETF in March this year, targeting stocks popular with retail investors.
(3) Diversified investment and low volatility
At the same time, the characteristics of ETF's diversified investment and low volatility have also won it a large number of investors. According to Bloomberg, Rich Powers, head of ETF and index products at Vanguard Group (Vanguard Group), which is widely popular with U.S. investors, said:
"There have been precedents in history for huge stock market turmoil, and more and more Investors are turning to (lower risk) index products."
(4) can quickly and effectively transfer and hedge risks
In addition, ETF can quickly and effectively transfer and hedge risks, which also makes ETFs widely favored by professional institutional investors during periods of stock market turmoil. According to Oriental Securities According to statistics from Sun Jiageng's team, in the U.S. market, the trading volume of ETF secondary markets is increasing both in absolute terms and as a proportion of the total stock market trading volume.
Can the magical performance of ETFs continue?
There is a saying in the asset management industry. The widely circulated saying: "Scale is the biggest enemy of performance." For ETFs in the U.S. market, this sentence has additional meanings.
From the perspective of concentration, U.S. ETF funds can be said to be "death by drought." Waterlogged, waterlogged. "According to Bloomberg, BlackRock's Vanguard Group and State Street alone control more than three-quarters of all ETF assets in the United States. For large-scale asset management companies, Bloomberg commented
Elisabeth Kashner, director of ETF research at FactSet, said: "Active management is a zero-sum game, and beating market benchmarks year after year is a very difficult task. ETFs won't change that either. ”
For funds seeking to survive in the remaining quarter of the U.S. ETF market, insufficient profits due to insufficient scale may bring them the risk of “closing down”. According to Bloomberg, many analysts and executives Said that generally speaking, the asset size of ETFs needs to reach 50 million to 100 million US dollars within five years of launch to make fund companies profitable, and funds below this size often choose to close.
FactSet data shows that in the United States, in recent years. Of the 600 active ETFs, three-fifths have assets of less than $100 million, and more than half have assets of less than $50 million. In response, Kashner said:
"Many of these companies are taking a serious look at their assets. future. "
In addition, due to the reduced transparency of the translucent ETFs that have been approved for issuance in the US market, investors also need to pay attention to the risks of this product.
The development of my country's ETFs
Compared with the international market, the development of my country's ETF funds The speed is no less impressive. In general, my country's ETF has developed rapidly in 2018. It only took less than 4 years to go from about 230 billion to over one trillion. It is one of the fastest growing products in the domestic market.
Sun Jiageng of Oriental Securities. The team believes that my country's ETF is still in the early stages of development and is developing rapidly. It has great room for development in terms of scale and product types.
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