2021 – Annnnd … it’s a wrap!

By all accounts, 2021 will go down in the history of ETFs as a record year – globally, and here in Canada as well.

Record inflows into ETFs overall, record uptake of ESG ETF solutions, record interest in all things “thematic”, record Actively Managed ETF solutions, and, and, and …

Alongside, of course, record new all-time highs in the market in the US, and valuations reaching or exceeding levels not seen since the Tech bubble in some instances …

As for “concerns”, well, there are plenty, to be sure, including narrowing “leadership” (with lots of pain beneath the surface…), rising OMICRON cases, inflation pressures, supply chain issues, amply telegraphed FED hiking cycle, China, and Russia / Ukraine …

Happy New Year’s and all the very best for 2022!

Looking at how 2021 panned out as far as Vanguard ETFs in Canada, here is what including end of December 2021 data into the mix looks like:

  • AUM growth: 53.6% or +$17 Billion (37.6% of that from net new sales; 16% market gains)
  • Net inflows for 2021: $11.93 Billion
  • Market impact: +$5.073 Billion
  • Asset allocation solutions as % of inflows: 27%

Exiting 2021, Vanguard’s aggregate line-up looks like this, as far as breakdown by category:

versus where it stood as at December 31, 2020:

for the year, with the potent combined tailwind of strong inflows, respectively strong equity returns, the equity category saw AUM rise from $20.245 Billion to $32.158 Billion (up 58.8%); while fixed income (despite generally negative returns in the category) grew from $7.056 Billion to $8.141 Billion (up 15.4%).

As for the fastest growing category, namely the “one ticket solution” category (Asset Allocation ETFs), combined, the 6 of them grew from $4.443 Billion to $8.447 Billion (up 90.1%). Amongst them, the bias was clearly toward the equity category, with 100% equities, and Growth Asset allocation solutions growing by 200.7% (!), respectively 84.8%, followed by balanced (+64%). The Retirement Asset allocation solution grew more in percentage terms than either balanced or growth, but off of a lower AUM starting point. As far as the Conservative and Income Oriented Asset Allocation solutions, growth was much more modest, at 44.8%, respectively 26.4% (still pretty decent growth though …).

In terms of what has transpired through the pandemic for Vanguard, this chart clearly shows that following a brief deceleration in net sales in the immediate aftermath of the pandemic shutting down the economy back in the spring of 2020, and performance also taking a significant hit, sales not only returned, but their levels reached a significantly higher range. At that, with markets doing well generally in 2021, positive market performance in the aggregate added as noted above 16% to that 53.6% y/o/y AUM growth number.

“Selling” from home for Vanguard clearly has been good in 2021, with the November 9th 2020 Pfizer vaccine news kicking this off that trend for them back then already as shown above.

Looking at the whole of 2021, as noted, equities were the beneficiaries of the largest inflows, topped at Vanguard by both S&P500 and US Total Market ETFs inflows. Using average monthly AUM and change in outstanding units from the end of 2020, 8 of Vanguard’s 37 ETFs had estimated inflows in excess of $ 500 Million each (VAB aggregate bond+ $526 Million, all the way up to +$1,672 Million for VFV as far as S+P500 ETF).

Performance-wise, here is what Vanguard’s ETF line-up delivered for investors:

December 2021: (final numbers to be confirmed, as distributions for December included in the below calculations were indicated as possibly being subject to some revisions …):

 

  • Strong finish to an already strong performance on the part of Dividend, and REIT – presumably bolstered by yields retreating (which translated into decent gains for long bonds for the month – VLB: +3.56% in December)
  • Min Vol dominates factors in December, edging Value modestly, with both, however, leaving Momentum in the dust (VVO: +4.85% m/o/m vs VVL +4.28%; vs VMO +0.95% for the month). Globally, YTD, Value best Momentum significantly in 2021
  • Emerging markets exposure – one word probably for 2021: Disappointing … Will that change in the year ahead?

2021:

 

  • FTSE Canada ahead of S&P500 (itself ahead of both Nasdaq and DJIA), with all cap Canada, however, lagging somewhat behind
  • Losses in 2021 – confined to the world of Bonds, with, at that, losses for the year trimmed by a strong December performance (as noted above re: VLB)

Vanguard’s line up by estimated size of 2021 inflows:

End of year AUM by ETF:

Of note: Size = Scale = cost efficiency … Impressive to see here the number of ETFs in Vanguard’s line up with over and in instances well of $ 1 Billion in AUM. At that, also beneficial in terms of primary liquidity, for those looking for it (not that its necessarily often the case, as Vanguard holders tend to do very much that … hold for … the same investment horizon Warren Buffet suggested he favours: forever …)

Value – whether Value is truly back or not at this juncture – some Advisors/Clients obviously decided it was worth gaining exposure to, pushing AUM significantly higher in 2021 relative to 2020 (AUM up over 229% y/o/y).