This past year saw flows of more than $450 billion into U.S.-based ETFs, an astronomical number. When compared to the previous record set in 2016, we still see growth of more than 60% year over year, a truly remarkable feat and a sign that investing (or investment advising) may be forever changed via the ETF revolution.
With the rise of a number of high-profile ETFs in 2017 in sectors such as cannabis [Horizons Marijuana Life Sciences ETF (TSX:HMMJ)] or Cryptocurrencies, it is true that some of the inflows into ETFs this past year were in exotic ETFs designed to take advantage of the exponential growth seen in key sectors this past year.
That said, the majority of cash inflows into ETFs were once again centered in traditional market or index-tracked funds; those with the lowest management fees and broadest diversification/portfolio construction performed the best in terms of asset growth, a sign that passive investing really has taken hold with retail investors – a trend which is unlikely to reverse any time soon.
The ETF industry has certainly changed the way investment advisors think about fees and service, and with actively-managed funds largely losing out to excellent low-cost passive options, it is hard to see the trend reversing in the long-term.
Invest wisely, my friends.