Page 16 - Investment Advisor March 2021

ETF ADVISOR

By Bernice Napach

ETFs Are Hot, Mutual Funds Are Not: Morningstar

Also, new ESG-linked ETFs are launched by New York Life and Gabelli.

ast year was very good for ETFs
but not for mutual funds. ETFs
Lhad net inflows of $502 billion,
led by taxable-bond ETFs that collected
nearly half those assets, while mutu-
al funds saw outflows of $289 billion,
according to Morningstar’s late January
fund flows report, which tracks both
ETFs and mutual funds.
That divergence in flows is nothing
new. ETF flows have topped mutual
fund flows in eight of the past 10 years,
but the gap in 2020 was the largest to
date, according to Ben Johnson, director
of global exchange-traded fund research
at Morningstar.
The growing popularity of ETFs posi-
tions them to overtake mutual funds
in assets, writes John Rekenthaler, Rekenthaler, for several reasons: they “The growth of ARK ETF Trust is
Morningstar’s vice president of research. don’t carry charge extra charges like nothing short of impressive,” according
It “won’t happen anytime soon, because loads or 12b-1 fees, are more transpar- to the Morningstar fund flows report.
mutual funds possess the power of his- ent about their holdings, more liquid “With its calendar-year inflows of $20.6
tory,” he writes — mutual funds have since they can be traded throughout the billion and strong gains for its ETFs’
$18.2 trillion in assets compared with day and less prone to post capital gains, holdings, the firm grew 11-fold during
$5.5 trillion in ETFs — “but the outcome which are taxable. the year to $34.5 billion as 2020 closed
appears inevitable.” ETFs have become so popular that from $3.1 billion in total assets at the
ETFs and mutual funds recovered traditional mutual fund companies like end of 2019.”
from the beating they took in March Dimensional Fund Advisors are launch-
when the coronavirus pandemic hit, ing them for the first time; others like MOST AND LEAST POPULAR FUND
trashing markets along with the U.S. Capital Group are planning to do the FAMILIES
economy in terms of flows and perfor- same. Some of these launches are brand iShares placed second in fund flows for
mance, but the comeback was uneven, new; others are conversions or clones of all of 2020, collecting $122.12 billion,
especially among equity funds. existing mutual funds. according to the Morningstar total for
Equity mutual funds suffered record combined ETF and mutual fund flows.
net outflows of $370 billion in 2020 — EXPLOSIVE GROWTH OF ARK Vanguard, as usual, led inflows with
double the previous record of $180 bil- In December 2020, four of the 10 funds $140.62 billion and J.P. Morgan placed
lion in outflows in 2019 and the seventh with the largest inflows were ETFs third, with $40.4 billion. State Street
consecutive year of net outflows despite and three of the four were from ARK Global Advisors, home of the first ETF,
a 16% gain in the S&P 500. U.S. equity Investment Management, home of five the SPDR S&P 500 SPY, placed fourth,
ETFs, in contrast, collected $129 billion of the best-performing ETFs in 2020. with $356.2 billion.
in 2020, marking their fifth consecutive They more than doubled in price. In Among the top 10 fund families that Maxx-Studio/Shutterstock
year of inflows above $125 billion. the first two weeks of January, flows experienced the biggest outflows were
Advisors are more likely to use ETFs into ARK ETFs topped flows into DFA (-$37 billion), T. Rowe Price (-$33.3
now instead of mutual funds, writes BlackRock’s iShares ETFs. billion), Franklin Templeton (-$25.2 bil-

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