ETFGI’s numbers provide another data point to show the continued strength of ETFs. According to the global data provider, net inflows into ETFs hit a record $ 661 billion in the first six months of 2021.
In the US, passive ETFs have already overtaken their mutual fund counterparts due to a capital gains tax advantage granted to them by existing regulations. While redemptions by mutual fund investors will cause the fund to sell some of its underlying holdings and potentially create a capital gains tax liability for all investors, including those who do not redeem their shares, ETFs have the ability to redeem in kind through transactions with authorized participants.
Last week, year-to-date inflows into U.S. ETFs hit $ 506 billion, according to SPDR ETFs. Meanwhile, the country’s mutual funds have raised $ 411 billion since 2014, the company said.
Aside from their tax advantage, ETFs typically have a lower management fee than mutual funds, offer more transparency in their holdings, and are more liquid because they offer intraday trading.
“Outside of the US, this trend is quite possible [of passive ETF assets exceeding index mutual funds] will continue as we see the general trend towards greater adoption by a wider range of investors, ”Eamonn O’Callaghan, vice president, European ETF Product at Brown Brothers Harriman, told the Just.