ETF Assets Soar as Investors Flock to Equity Funds
The exchange-traded fund (ETF) industry has witnessed a remarkable surge in assets, with Charles Schwab Corp., the fifth-largest U.S. ETF issuer, reporting a staggering 27% increase in fourth-quarter ETF assets. This translates to a whopping $494.5 billion jump, bringing the company’s total ETF assets to $2.34 trillion.
Equity Funds Drive Growth
Schwab’s ETF assets have been propelled by investors pouring money into its equity funds, which have benefited from the rising stock markets. The company’s ETF assets rose by $61.5 billion, or 2.7%, from the previous quarter, with its biggest funds pulling in significant new assets.
Record Inflows into ETFs
Last year, U.S. investors poured a record $1.12 trillion into ETFs, driven by demand for artificial intelligence, technology, crypto, and financial assets. This trend has been mirrored by BlackRock Inc., the world’s largest ETF issuer, which reported $390 billion in fourth-quarter ETF inflows.
Schwab’s ETF Assets Critical to Revenue
According to Aniket Ullal, head of CFRA ETF Research & Analytics, funds, including ETFs and mutuals, account for 56% of Schwab’s 2024 revenues from asset management and administration fees. This represents about 16% of the company’s total 2024 revenues. “The strong growth in ETF assets is very meaningful to the firm’s overall prospects,” Ullal emphasized.
Top-Performing Funds
Schwab’s largest fund, the $65.7 billion Schwab U.S. Dividend Equity ETF (SCHD), added $6.02 billion in fourth-quarter inflows, triple that of the previous quarter and more than six times the flows in the same quarter in 2023. The fund is exclusive to companies with a 10-year history of paying dividends. Its second-largest fund, the $52.3 billion Schwab U.S. Large-Cap ETF (SCHX), pulled in $3.94 billion in the fourth quarter, again, more than triple the fund’s third-quarter flows and a fivefold increase from the same quarter in 2023.
Contrasting Performance
In contrast, State Street Corp., the number three U.S. issuer, reported that its SPDR ETF unit pulled in less cash in the fourth quarter of 2024 than in the same period in 2023. This was largely due to investors cutting the amount of money that went into the company’s flagship SPDR S&P 500 ETF Trust (SPY) by more than half.
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