Exchange-traded product assets reach historic levels. Where one market analyst sees the money going

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The world of exchange-traded assets just keeps getting bigger.

Exchange-traded funds and exchange-traded products pulled in a record $7 trillion-plus in assets in August, with U.S.-based ETFs and ETPs accounting for some $4 trillion of those flows. The U.S., Canada, Europe and Japan’s exchange-traded markets all also reached historic highs for asset-gathering.

A key factor driving the inflows is a renewed sense of confidence among investors, Deborah Fuhr, the founder and managing partner of ETFGI, told CNBC’s “ETF Edge” on Monday.

“ETFs really busted the myths that they weren’t able to handle the significant volatility in inflows and outflows during March and April,” Fuhr said. “From there, what we’re seeing is a significant increase in the number of investors using ETFs.”

Nearly 6,000 institutions now hold about half of all ETF assets across 62 countries, Fuhr said. As for where the money’s going, fixed-income-based products top the list, with $160 billion of net inflows globally in August, up from $148 billion over the same time period last year, she said.

The Fed has clearly given a good signal to people that ETFs, fixed income, high yield and investment grade are good investments,” Fuhr said.

Themes such as ESG, which stands for Environmental, Social and Governance-related investments, technology and health care have also captured investors’ attention and money, she added.

“We’re also seeing active nontransparent. We have 15 new launches this year gathering about [$]500 million so far,” she said. “And gold has clearly played two different views there for investors. They’re in [$]49 billion of net inflows. Some see it as a safe haven. Others see it as a potential hedge against inflation given all the stimulus going into the markets.”

Kim Arthur, the president and CEO of Main Management, agreed that ETFs proving their resilience was a major catalyst for the industry’s asset growth.

“Every time that we’ve had a volatility spike or disruption in the market for the last 20 years, ETFs have done a phenomenal job,” he said in the same “ETF Edge” interview. “They’ve done exactly what they’re supposed to do with the price discovery.”

With liquidity still strong — “not like the old days when you’d pick up a phone and try to call a dealer when bids were fading and the phone would just keep ringing and ringing and ringing” — ETFs are acting exactly as they’re supposed to, Arthur said.

“That’s definitely why we are seeing institutional involvement continue to increase,” he said. “And high-net-worth individuals continue to move into them aggressively, too.”

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