Fund Shifts
Funds are flowing into the ETF market as global fund management companies such as Fidelity, Amundi, and BlackRock are lowering the fees. Meanwhile, the equity fund market is losing its appeal these days.
In 2012, a total of US$30.4 billion flowed into the global ETF market, and the amount is US$154 billion when bond ETFs are included. US$120 billion escaped from the equity fund market during the same period.
The pace of the capital inflow into the European ETF market is especially fast with competition going on in earnest. The amount was US$19.6 billion in 2013 and US$29.3 billion in the first quarter of 2014 alone.
BlackRock, the largest ETF management company in Europe, announced last month that it lowered the total expense ratio (TER) of six ETFs to 5 to 28 bp and released new emerging market ETFs at 25 bp. Fidelity Worldwide Investment cut its index equity fund fee in Britain in May, too.
In the United States, the race started much earlier than in the European market. Vanguard increased its share in the U.S. market to 18.2 percent through a fee cut as of the end of February 2013, dragging down the market share of BlackRock iShare by seven percentage points to 41.2 percent in three years. Online stock firm Charles Schwab, which entered the ETF market in 2012, provided the lowest fee rate in the market, 0.04 percent, gaining much attention.
The same trend is witnessed in the Korean market as well. The equity fund amount decreased from 140.2 trillion won (US$135.8 billion) to 85.5 trillion won (US$82.8 billion) between 2008 and 2013, whereas that of ETFs skyrocketed from 400 billion won (US$388 million) to 19.4 trillion won (US$18.8 billion) during the past 10 years.