The mutual fund industry is poised to lose its crown as the dominant passive investment vehicle, with the non-active exchange traded fund sector on track to surpass it for the first time. Global assets under management of passive, index-tracking ETFs hit a record $8.66tn at the end of June, according to data from Morningstar, just $132bn shy of those in passive mutual funds.
The gap has narrowed from $623bn at the end of 2019 and $305bn in December 2020, suggesting that stronger inflows will make ETFs the dominant format for index investment globally in the second half of this year.
Andrew Jamieson, global head of ETF product at Citi, said the rise of ETFs was “clearly the direction of travel” with the fund structure “setting new records [for assets under management] all the time”. Net flows into ETFs hit a record $661bn in the first six months of the year, according to consultancy ETFGI, smashing the previous first-half record of $294bn set in 2020.
“I have been working in the industry for eight years and from the first day I walked in it has been assumed that ETFs are the future. They are just a more efficient fund wrapper than the traditional mutual fund,” said Kenneth Lamont, senior fund analyst for passive strategies at Morningstar.
