Since the emergence of “Modern Portfolio Theory” and the “Capital Asset Pricing Model” in the late 1960s, institutional investors have taken a quantitatively driven approach to portfolio construction, looking to create portfolio diversification and obtain better risk-adjusted returns by balancing their asset-class exposures. This journey has seen several important advancements in thinking about how to optimally achieve desired results.
Funds that want to take the total portfolio approach first need to get the total portfolio view. To do that they not only need data – and lots of it – but a rock-solid understanding of exactly how they’re going to use it.
ETF global flows build to $10.4t tsunami
Global investors have poured a record amount into exchange-traded funds (ETFs) during the first two months of 2021, according to industry data.
UK-based consultancy firm ETFGI clocked about US$222.5 billion (A$288 billion) of net flows into the sector globally over January and February, over twice the figure for the same period in 2020, the Financial Times reported.
In February, ETF flows hit an all-time monthly high of US$132 billion, almost 6 per cent about the previous top achieved last November.
Deborah Fuhr, ETFGI founder, said in the FT report that the “ETF industry has now registered a monthly record for new inflows for a second time in just four months”.
The spectacular rise of the mainly passive-tracking listed fund sector over the last few years took global ETF assets under management through the US$8 trillion (A$10.4 trillion) mark this January, ETFGI data shows, adding US$1 trillion since August 2020. Global ETF assets stood at about US$6.3 trillion at the end of 2019 compared to less than US$2 trillion in December 2012.
Market leaders Vanguard and the BlackRock-owned iShares pocketed most of the flows this year, raking in a respective US$63 billion and US$42.3 billion for the two months to the end of February.
However, Ark Invest, the ‘disruptive innovation’ specialist part-owned by Nikko Asset Management, was third in the ETF asset race with net inflows of just above US$16 billion compared to the US$20.5 billion the manager accrued during the 2020 calendar year.
“The strong inflows for Ark have helped to push global assets in actively managed ETFs beyond the $300bn milestone,” Fuhr said in the FT article. Ark funds have whipsawed in March as market volatility hit the tech sector, in particular.
