Total assets in ETFs only surpassed those invested in hedge funds for the first time at the end of 2015, and ETFGI’s analysis suggests that was indeed a turning point.
It showed there was a record $3.548trn (€3.356trn) invested in the 6,630 ETFs/ETPs listed globally at the end of 2016. This compared with total assets in the global hedge fund industry as reported by Hedge Fund Research (HFR), of $3.018trn invested in 8,326 hedge funds at the end of 2016.
During last year, ETFs listed globally gathered a record $389.34bn of net inflows, surpassing the prior record of $372.27bn set in 2015, according to ETFGI’s Year-end 2016 global ETF and ETP industry insights report. By the end of December 2016 ETFs had posted 35 consecutive months of net inflows.
The research firm said that during 2016 HFR reported that hedge fund investors redeemed $70.1bn, the largest annual outflow since 2009, when $131bn was withdrawn.
“Many investors have become disappointed with the high fees, performance and lack of liquidity of hedge funds over the past few years,” said ETFGI in a statement.
It noted that the hedge fund benchmark index, the HFRI Fund Weighted Composite Index, was up 5.5% in 2016, which was significantly lower than the 11.9% return of the S&P 500 Index over the same period.
“In each of the past six years the performance of the HFRI Fund Weighted Composite Index was significantly lower than the return of the S&P 500 Index,” ETFGI said.