According to the consultancy, there was US$2.97 trillion invested in the 5,823 ETFs/ETPs listed globally at the end of the quarter, compared to the US$2.96 trillion invested in 8,497 hedge funds.
“It is only by a nose,” said Deborah Fuhr, managing partner at ETFGI, “but it is something we have been monitoring closely and predicted would happen in the second quarter.”
As can be seen from the graph below, the group pointed out, assets in the ETF/ETP industry have been gaining on those in the hedge fund industry notably since the start of the global financial crisis in 2008.
According to Fuhr, there are a number of reasons for the change. The minimum investment size is very low, as are the costs, she said, which have made the products attractive, especially as both hedge funds and active mutual funds have struggled to beat the index in recent years.
Source: ETFGI and Hedge Fund Research
The consultancy added, “According to our research the asset-weighted average annual cost for ETFs/ETPs is 31 basis points or less than one third of a percent, while fees charged by the majority of hedge funds are 2% of assets and 20% of profits.
“Accordingly, net inflows into ETFs/ETPs have been significantly higher than net inflows into hedge funds over the past few years. In the first half of 2015, net inflows into hedge funds globally were US$39.7 billion, while net inflows into ETFs/ETPs globally were US$152.3 billion over the same period.”
The other primary reason, Fuhr said is that the ETF toolbox has expanded significantly.
“You can now access listed real estate, infrastructure and even liquid alternatives through ETPs,” which provides advisers with greater flexibility,” she added.
