A Year-End Report Card for 2020 ETF Industry Predictions

As a very difficult 2020 draws to a close, David Mann, Head of Capital Markets, Global Exchange-Traded Funds (ETFs), once again looks back on some of the industry trends he had predicted would likely unfold this year. How many came to fruition? And which missed the mark? Read on.

I must admit this year it was a little harder to put pen to paper for my prediction columns—both for this one that looks back on my 2020 predictions as well as my 2021 predictions, which are coming soon. For example, there is no way I would have ever predicted that I’d be writing this column from my house, which is exactly where I have written every column for the past 10 months.

Industry-wise, this was a monster year for ETFs—as of the time of this writing, we are closing in on $485 billion of net inflows in the United States.1 That is certainly going to help my first two predictions, which were based on assets under management (AUM) aspirations. On to the report card:

1. Active fixed income ETF assets will reach $110 billion

Grade: B+

This one is going to be very close as the trends have played out almost exactly as my team and I had predicted. First, we expected active fixed income flows to slightly improve on the $21 billion number from last year—currently that figure is near $27 billion.2 We also expected a bit of market appreciation within the asset class, which has also been the case.

The current AUM for active fixed income ETFs is at $107 billion.3 In hindsight, I was probably a little aggressive in adding the extra $10 billion in my prediction. However, we are knocking on the door of $110 billion, and the year is not quite over. Not quite an “A” grade, but pretty darn close IMHO.

One more comment on active ETFs before moving to the second prediction. In 2020, the acceptance and adoption of active ETFs overall is most certainly increasing. We speculated that with the adoption of the “ETF Rule,” investors would better appreciate that there is no operational difference between active and index funds. That was certainly evident in the flows this year. Although active ETFs still do not represent 3% of all assets, they represented 10% of the 2020 inflows.4 That is a very exciting trend!