iShares ETFs surpass US$2 trillion in AUM in 2019
Firm passes several other milestones such as fixed income ETFs eclipsing US$1 trillion and sustainable ETFs passing US$12 billion globally
9 Jan 2020 | The Asset

Globally, iShares ETFs surpassed US$2 trillion in assets under management (AUM) in 2019, ending the year with US$185 billion in net new assets and 33% global market share.  

iShares also passed a series of milestones across its product lines:

•          Fixed income ETFs eclipsed US$1 trillion globally with iShares Fixed Income ETFs accounting for over 47% of these assets at year-end and US$112 billion in flows.

•          The iShares Factor ETFs gathered a record US$34 billion of inflows, ending 2019 with over US$179 billion in assets.

•          iShares Sustainable ETFs gathered US$12 billion globally, including the most successful launch of any new ETF strategy in 15 years.

“Clients are increasingly using iShares as instruments of active return,” says Salim Ramji, global head of iShares and Index Investments. “In 2019, clients scaled their use of iShares across our Fixed Income, Factor and Sustainable ETFs, with record flows in each; investors are using iShares not just for Core building blocks but as tools to seek better outcomes across their entire portfolio.”

Globally, iShares ETFs ended 2019 with a record US$2.2 trillion in assets under management and US$185 billion in net new assets. Strong, steady inflows across product lines demonstrate the diversified mix and the variety of ways in which clients are using iShares to manage risk in volatile markets; access investment classes more conveniently; and better align their values with their portfolio objectives.

Fixed income ETF assets eclipsed US$1 trillion across the industry. iShares, which pioneered the first fixed income ETF in 2002, reached over US$565 billion in assets globally and traded US$2.2 trillion on exchange in the US and Europe.

Around the world, investors accelerated the adoption of fixed income ETFs – from long-term exposures in wealth models to hedging instruments for institutions to market access tools for active fixed income managers.

“In 2019, iShares Fixed Income ETFs were about more than indexation – they became an enabling technology in the modernization of the bond market,” Ramji says. “Active fixed income managers added them to help improve alpha through tactical allocation and liquidity management; central banks used them to access securities markets more conveniently; institutions used them to execute their portfolio trading strategies at lower cost.”

Last year, more investors than ever before used iShares ETFs to take active risk, tapping into factors as an additional source of potential return beyond strategic asset allocation. Flows into the iShares US minimum volatility factor exposure brought in over US$12 billion in assets in 2019, the first time a factor exposure outpaced every market-cap weighted iShares ETF.

In March, BlackRock launched its first actively managed Factor ETF, enabling clients to dynamically access BlackRock’s factor timing expertise in a single, transparent ETF. Strong demand across the entire iShares Factor line-up resulted in US$34 billion of inflows.

In 2019, iShares made significant investments in its Sustainable ETF line-up, ending the year with US$22 billion in assets, US$12 billion in flows (US$17 billion including iShares Index Mutual Funds) and nearly tripling the number of ETFs to 81. The launch of an US iShares ESG ETF in May became the largest debut of any ETF in the past 15 years.

Sustainable ETFs became iShares’s fastest-growing category, driven largely by interest in and usage of environmental, social and governance (ESG) ETFs from every region and client type, from asset owners and wealth managers in Europe to financial advisors in the US. iShares is planning a series of actions this year to bring greater access to sustainable investing through its offerings.

iShares commends the Securities and Exchange Commission’s (SEC) unanimous approval of the ETF Rule in September, which will help support future ETF growth and increase ETF market transparency. iShares also partnered with Intercontinental Exchange (ICE) to launch the ICE ETF Hub, a marketplace utility that will standardize ETF creation and redemption processes for a broad range of participants.

Additional functionality, including support for the negotiation of custom baskets and international expansion are planned for this year. Taken together, the efforts in 2019 to bolster the architecture that supports the ETF ecosystem will help ensure that ETFs operate efficiently in 2020 and beyond.

Regional Summaries

APAC: Client iShares ETF holdings surpass US$135 billion

“2019 was a landmark year for China onshore equities and bonds, with representation in global indexes gradually increasing,” says Susan Chan, head of Asia Pacific iShares at BlackRock. “This deepens investment opportunity for investors to access the China onshore capital market, which is currently under-invested by foreign investors. Asia is still at a nascent stage in terms of ETF development and adoption, and we will continue to educate clients about the benefits of building their portfolios with transparent and liquid market access vehicles such as ETFs. We have seen strong client demand in our region for our fixed income products, led by institutional investors including insurers. Our Australian fixed income ETF products also doubled their AUM in a year.”

Americas: Robust growth underpinned by new uses and users of ETFs

“The phenomenal flows into iShares are sending a powerful message, namely that investors of all kinds continue to find new and different uses for ETFs as essential building blocks for portfolio construction,” says Armando Senra, head of iShares Americas at BlackRock. “Both wealth and institutional clients are turning to iShares to pursue key financial outcomes – from active managers who use fixed income ETFs as a more efficient tool to gain bond market exposure to advisors who embrace factors as systematic instruments of potential active return. This year was also an inflection point for the mainstreaming of ESG investing, a trend that’s poised to accelerate in 2020 as investors seek to incorporate sustainability into their whole portfolios, across asset classes.  

“In the US, factor and fixed income ETFs led the way. Flows into US fixed income iShares came to over US$66 billion last year, while new asset growth in US iShares Factor ETFs outpaced all competitors, at US$29 billion. Elsewhere in the region, we’re beginning to see signs of growth in Canada, the birthplace of the ETF, but a market that’s still in the early days of ETF adoption. Assets in iShares ETFs in Latin America increased a robust 15% in 2019, driven largely by a strong expansion into fixed income ETFs.” 

Europe: Growth driven by a view of the whole portfolio

“ETF adoption in Europe accelerated to a record level last year, crossing US$1 trillion in assets, in response to changes in client demands, in markets and regulation,” says Stephen Cohen, head of iShares EMEA at BlackRock.

“Overall, new money into European iShares ETFs increased to an annual record of US$60 billion. As these forces gather strength, investors are increasingly shifting their processes from traditional security and fund selection to holistic portfolio construction with more indexing. Two trends in particular are accelerating in EMEA: the growth of sustainable ETFs, where iShares is the leading provider, with US$11 billion in assets under management, and the adoption of fixed income ETFs where iShares remains the leading provider, gathering US$43 billion in 2019.

“The use of fixed income ETFs is the biggest development in the European industry with year-on-year trading volumes growing by more than 50%, largely driven by European credit, as investors take advantage of the liquidity offered by ETFs. Overall, MiFID II-mandated transparency continues to paint a clearer picture of the true liquidity available in European ETFs - nearly US$2.5 trillion in volumes in 2019 (versus US$500 billion visible before implementation) - creating greater comfort for investors.”