iShares Predicts "Incredibly Bright Future" for ETFs in the U.S.
U.S. ETF Assets Could More Than Double in Next Five Years To Exceed $3.5 Trillion by 2017
Growth Fueled by Existing and New Investors Segments, Greater Usage of ETFs as Core Exposures and Fixed Income ETFs
SAN FRANCISCO--(BUSINESS WIRE)-- The U.S. market for Exchange Traded Funds (ETFs) will likely grow to more than $3.5 trillion in assets over the next five years, compared with $1.5 trillion1 today, according to a new industry projection announced today by iShares, the ETF business of BlackRock, Inc. (NYS: BLK) . Growth in the U.S. is expected to be primarily driven by increased ETF usage by existing and new investor segments, ETFs as core exposures and a widening investor base for fixed income ETFs.
Mark Wiedman, the Global Head of iShares, commented: "In the last decade, ETFs have evolved from obscurity to a $2+ trillion industry2, embraced by retail and institutional investors alike. But these are still early days in ETF adoption. Even in the most mature market, the U.S., there is an incredibly bright future."
According to iShares, growth in the U.S. ETF market will be primarily driven by six key trends:
1. Continued growth of the advised market: The continued growth of fee-based advisory and greater ETF adoption by financial advisors of all shapes and sizes is expected to continue to drive ETF growth in the retail market. Advisors blending active and index products together in a portfolio, coupled with end investors learning more about the benefits of ETFs and requesting these products from their advisors, are seen as being contributing factors.
2. Self-directed as the fastest growing portion of the market: With an addressable market of more than $4.0 trillion and a projected growth rate of 9%,3 self-directed investors should have a significant impact on ETF adoption and growth. The expansion of commission-free ETF platforms and marketing directly to the self-directed investor will likely also continue to factor in this growth trajectory.
3. Increasingly more institutional investors using ETFs in new ways: Existing and new institutional clients, particularly asset allocators, are increasing their investments in ETFs. Nine out of 10 institutional ETF users expect their level of ETF investments to remain stable or increase over the coming year, and half plan to increase their allocations by 2014.4 Institutions are also discovering how to use ETFs in innovative ways, leveraging their access and liquidity to meet their investment needs.
4. Retail and institutional clients adding ETFs for core exposures:To date, ETFs have largely been used to take a market position, but more and more buy-and-hold investors are using both equity and fixed income ETFs for core exposures. While this trend is at the beginning of the adoption curve, from 2011 to 2012 assets in core exposures grew nearly 30%, and 2013 is off to a strong start in flows5.
5. The continued revolution of fixed income products: After more than a decade of continuous growth, fixed income ETFs are just starting to take their place as an essential fixed income capital market instrument. The U.S. fixed income market is more than twice the size of the equity market, however, fixed income ETF penetration is only one tenth of the level of equity ETF penetration.6Changing demographics, the ongoing evolution of the bond markets and greater awareness of fixed income ETFs from a wider investor audience will all lead to increased adoption.
6. New products and segments: There is a significant opportunity to expand the existing ETF market through new ETF products and new client segments. The next generation of ETFs should deliver innovative exposures, such as low volatility and term-maturity, as well as solutions-based products. New client segments such as banks and offshore investors are just starting to discover ETFs but will drive the next phase of growth.
Wiedman continued, "Our industry has so much exciting work yet to do with clients - in placing ETFs at the core of portfolios, deploying ETFs in undiscovered ways, and expanding ETF technology into whole new swathes of the capital markets."
BlackRock is a leader in investment management, risk management and advisory services for institutional and retail clients worldwide. At March 31, 2013, BlackRock's AUM was $3.936 trillion. BlackRock helps clients meet their goals and overcome challenges with a range of products that include separate accounts, mutual funds, iShares®(exchange-traded funds), and other pooled investment vehicles. BlackRock also offers risk management, advisory and enterprise investment system services to a broad base of institutional investors through BlackRock Solutions®. Headquartered in New York City, as of March 31, 2013, the firm has approximately 10,600 employees in 30 countries and a major presence in key global markets, including North and South America, Europe, Asia, Australia and the Middle East and Africa. For additional information, please visit the Company's website at www.blackrock.com.
iShares is a global product leader in exchange traded funds with over 600 funds globally across equities, fixed income and commodities, which trade on 20 exchanges worldwide. The iShares Funds are bought and sold like common stocks on securities exchanges. The iShares Funds are attractive to many individual and institutional investors and financial intermediaries because of their relative low cost, tax efficiency and trading flexibility. Investors can purchase and sell shares through any brokerage firm, financial advisor, or online broker, and hold the funds in any type of brokerage account. The iShares customer base consists of the institutional segment of pension plans and fund managers, as well as the retail segment of financial advisors and high net worth individuals.
Carefully consider the iShares Funds' investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds' prospectuses, which may be obtained by calling 1-800-iShares (1-800-474-2737) or by visitingwww.iShares.com. Read the prospectus carefully before investing.
Investing involves risk, including possible loss of principal. Transactions in shares of the iShares Funds will result in brokerage commissions and will generate tax consequences. iShares Funds are obliged to distribute portfolio gains to shareholders. Shares of the iShares Funds may be sold throughout the day on the exchange through any brokerage account. However, shares may only be redeemed directly from a Fund by Authorized Participants, in very large creation/redemption units. Diversification may not protect against market risk.
This material represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the funds or any security in particular.
The iShares Funds are distributed by BlackRock Investments, LLC (together with its affiliates, "BlackRock"). The iShares Funds are not sponsored, endorsed, issued, sold or promoted by MSCI, Inc., nor does this company make any representation regarding the advisability of investing in the Funds. BlackRock is not affiliated with the company listed above.
© 2013 BlackRock. All rights reserved. iSHARES and BLACKROCK are registered and unregistered trademarks of BlackRock. All other marks are those of their respective owners.
This press release, and other statements that BlackRock may make, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act, with respect to BlackRock's future financial or business performance, strategies or expectations. Forward-looking statements are typically identified by words or phrases such as "trend," "potential," "opportunity," "pipeline," "believe," "comfortable," "expect," "anticipate," "current," "intention," "estimate," "project," "forecast," "position," "assume," "outlook," "continue," "remain," "maintain," "sustain," "seek," "achieve," and similar expressions, or future or conditional verbs such as "will," "would," "should," "could," "may" or similar expressions.
BlackRock cautions that forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made, and BlackRock assumes no duty to and does not undertake to update forward-looking statements. Actual results could differ materially from those anticipated in forward-looking statements and future results could differ materially from historical performance.
1 Source: BlackRock, May 2013
2 Source: BlackRock and Bloomberg, January 2013
3 Source: Cerulli, December 2011 and October 2012
4 Source: Greenwich Associates, 2013
5 Source: BlackRock and Bloomberg, May 2013
6 Source: BlackRock and Bloomberg, December 2012
KEYWORDS: United States North America California
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