Inflows Into ETFs In Q1 Were Beyond The Expectations Of Even The Most Optimistic Analysts

Written by Sumit Roy (

In describing the amount of money that came into ETFs during the first quarter of 2017, "enormous" would be an understatement. "Record-breaking" is technically correct,  but the point is that the amount of money coming into ETFs is beyond the expectations of even the most optimistic analysts. 

  • In Q1 of 2016 inflows into ETFs totaled $29.6 billion.
  • In Q1 of 2017 inflows totaled $134.7 billion―more than four times the amount of 2016's first quarter.
  • If inflows continue at this torrid pace, total 2017 inflows will reach almost $540 billion, blowing past last year's record $287.5 billion. 

Many Reasons For Enthusiasm 
Investors had plenty of reasons to plow money into ETFs this year:

  1. By some measures, confidence about the economy and the stock market hit the highest levels since the dot-com mania of nearly 20 years ago. Trump's bullish trifecta of tax cuts, deregulation and infrastructure spending were the catalyst for that. While none of his big economic objectives have yet come to fruition, just the anticipation of business-friendly policies pushed the S&P 500 up by 6.1% during the first quarter. 
  2. Then there's the secular shift away from high-cost mutual funds and toward low-cost ETFs. That has been occurring for years and certainly didn't change in Q1. The vast majority of money that came into ETFs during the period headed toward the cheapest exchange-traded funds.

Low-Cost ETFs Win
In fact, of the 10 ETFs with the largest inflows during the first quarter, 9 of them had an expense ratio of 0.15% or less. That includes the iShares Core MSCI Emerging Markets ETF (IEMG). Its $6.6 billion worth of creations [inflows] in the first quarter was the most of any ETF, and pushed its total assets under management to $27 billion.

Sentiment on emerging markets improved markedly from last year, when investors fretted about:

  • whether China was on course for a hard landing;
  • whether a 1997-style financial crisis was brewing in the region;
  • and whether Trump's trade policies would prove detrimental for emerging economies.
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