The growing US ETF space offers a great opportunity



The U.S. ETF market is huge—and growing

The U.S. exchange-traded fund (or ETF) market attracts tons of investors. In fact, according to a report released by Deutsche Bank on January 16, 2014, global ETF assets grew 28.2% in 2013—crossing the $2.3 trillion mark. The U.S. ETF market led this overall growth. It saw record inflows of $214 billion in 2013. ETF assets in the U.S. finished 2013 at $1.7 trillion—up 33% from the previous year. The U.S. market dominates the global ETF space, with roughly 72% of global ETF assets.

So how can you take advantage of this growing opportunity in your portfolio?

US ETF industry growth in 2013 (YoY)

More and more investors are getting involved in the U.S. ETF market

The U.S. ETF market isn’t just huge. It also dominates overall ETF trading activity. Of the $15.7 trillion in global annual ETF turnover in 2013, the U.S. market share came close to 89% or $14 trillion—up 7.7% since 2012.

Important market trends

2013 trends in exchange-traded product (or ETP) flows suggest that investors preferred risky assets. Investment flows diverted towards developed markets because these markets showed signs of recovery.

The SPDR S&P 500 ETF (SPY) and the iShares S&P 100 ETF (OEF) track the large-cap equities of companies like Apple Inc. (AAPL) and ExxonMobil (XOM). So these ETFs can help you gauge the U.S. recovery.

Of the different asset classes, U.S. equity flows totaled more than $144.6 billion in 2013. Within the fixed income space, corporate assets dominated flows, with inflows to the tune of more than $15.4 billion. The commodity class, on the other hand, continued to see an outflow.

ETF markets keep growing faster than mutual funds

In the U.S., ETFs beat mutual funds in the race for assets. In 2013, ETFs grew faster and gathered more new net assets than mutual funds—within both the equity and fixed income spaces.

As a result, many traditional asset managers are implementing or fine-tuning strategies to enter the ETF industry. A very recent example is JPMorgan (JPM). The bank is entering the ETF space with its JPMorgan Diversified Return Global Equity ETF (JPGE).

So there are a lot of popular and new ETFs in the U.S. that you can consider.

Key players

Read on to the next part of this series to learn about the major ETF providers in the U.S. and how they’re shaping the market.

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