Weakness and uncertainty in the bond market has seen an influx in investments to Exchange Traded Funds. Capital inflows into ETFs built on environmental, social, and governance has been on the rise, reaching record highs amid the economic slowdown fuelled by the pandemic.
ESG ETF Capital Inflows
Inflows into ESG ETFs have already clocked record highs of $22 billion this year, three times the inflows recorded in 2019. Amid the growing investments, there is no accurate measure that can be used to weigh ESG components.
For instance, BlackRock Inc.’s iShares ESG Aware MSCI USA ETF (ESGU) consists of Exxon Mobil, whose products are fuelling environmental pollution. The Xtrackers MSCI USA ESG Leaders Equity ETF (USSG) lists McDonald stock, a fast-food company that is under immense scrutiny over the way it treats employees.
The ESG ETF landscape also appears to be highly centralized, with BlackRock ESG products making up the majority of total assets in the sector. Its iShares ESGU, iShares ESG Aware MSCI EM ETF (ESGE), and iShares ESG Aware MSCI EAFE ETF (ESGD) account for $13.4 billion of $22 billion inflows year to date into the emerging segment.
Complicating concerns about ESG investing is the fact that the Securities and Exchange Commission does not regulate how firms issue ETFs and label them ESG compliant. However, in the recent past, the regulator has hinted at the possibility of adding rules on funds that call themselves ESG, in a bid to protect investors.
ETFs For Ant Group Exposure
Amid the concerns about ESG ETF investment, Ant Group, Alibaba’s financial arm, going public in one of the biggest IPO promises to present unique investment opportunities. While the stock is to be listed in Hong Kong and China, investors can still gain exposure by investing in Renaissance International IPO ETF (IPOS – Get Rating), KraneShares China CSI Internet ETF (KWEB – Get Rating), iShares MSCI China ETF (MCHI), and the SPDR S&P China ETF (GXC). The ETFs are expected to add Ant Group once it goes public.
Ant Group boasts of an impressive track record, having become a juggernaut when it comes to online banking, digital payments, and e-commerce payment processing. The company generated $10.5 billion in revenue in the first half of the year; nearly 40% increase even as the pandemic took a toll on most companies. The company posted a $3.4 billion profit in 2019.
First Trust Advisors L.P ETF AUM
Separately, First Trust Advisors L.P has seen its ETFs clock a new milestone in reaching $2 billion in assets under management. The First Trust US Equity Opportunities ETF (NYSE Arca: FPX), the First Trust IPOX® Europe Equity Opportunities ETF (NASDAQ: FPXE), and the First Trust International Equity Opportunities ETF (NASDAQ: FPXI) have outperformed in line with the bullish momentum in the ETF market.
The ETFs are designed to provide investors with a diversified one-stop solution for accessing the performance of the largest and best performing initial public offerings. The unique investment approach deployed by First Trust Advisors continues to benefit investors seeking equity exposure outside the traditional benchmarks.