Exchange traded fund (ETF) assets held by financial intermediaries reached an all-time high of $2.2 trillion in 2015, according to data from Broadridge’s Fund Distribution Intelligence.
ETF assets saw an increase of $124 billion, or 6.1 percent, which the report attributed to an increase in the popularity of passive investment vehicles.
Passively managed index funds and ETFs have increased by 2 percent between Q4 2014 and Q4 2015, while actively managed funds and ETFs have dipped by 1 percent. According to Broadridge, this trend is set to continue as use of ETFs and index funds increase for core allocations.
In contrast, although the total of long-term mutual fund assets exceeded ETFs at $7.29 trillion, this is $161 billion less than the total at the end of 2014, marking a dip of 2.2 percent.
The only channels that saw an increase in long-term mutual fund assets were the bank and discount channels, which registered increases of $52 billion and 29 billion, respectively. These are also the two channels with the highest usage of passively managed products.
A larger increase in the use of passive products was seen in retail distribution channels, which registered a 2.6 percent increase, compared to a 1.6 percent increase in institutional channels.
Among the retail channels, registered investment advisors saw the strongest growth in ETF distribution, increasing from $413 billion in Q4 2014 to $500 billion in Q4 2015. This is also an increase over Q3 2015, which registered $465 billion in ETF distribution.
Registered investment advisors now make up 30 percent of all usage of passive products, although online retail shareholders still make the majority, with 58 percent of all usage.
Conversely, independent broker dealers are the highest users of active funds, holding more than 80 percent in active investments.
Passively managed products now make up 31 percent of usage across all channels, an increase of two percentage points compared to the end of 2014.
Broadridge attributes this to an increase in use of both index funds and ETFs by advisors, and also in model portfolios.
Frank Polefrone, senior vice president of Broadridge’s data and analytics business, said: “The increased usage of passive investments across all distribution channels accelerated in 2015. Our analysis shows that passively managed index and ETF assets increased by two percent during 2015, while actively managed funds and ETFs saw a one percent decrease.”
The Broadridge Fund Distribution Intelligence analyses sales and asset data across more than $9 trillion of long-term mutual fund and ETF assets spanning more than 900 distributors.
