After a record year in 2020, the exchange-traded fund space is set to continue its rapid growth, Invesco says.
The industry’s ability to accrue over $500 billion in new assets last year “proves a couple of things,” Anna Paglia, the company’s head of ETFs and indexed securities, told CNBC’s “ETF Edge” this week.
“First of all, the industry’s not saturated. It has not reached capacity yet,” Paglia said in a Monday interview. U.S. ETFs have amassed more than $5 trillion in assets to date.
“The second thing is that investors really accelerate their adoption of ETFs in periods of market crisis,” she said, citing the years 2000, 2009 and 2020 as examples.
As of now, the industry is set to build on the gains that fueled 2020’s massive inflows, Paglia said.
“I don’t see anything on the horizon that can stop the growth of the ETF market,” she said. “If nothing else, education is reaching an all-time high for this technology, adoption is becoming widespread and 2020 has also taught us a number of lessons on the resilience of the ETF wrapper, especially when it comes to fixed-income ETFs.”
Two overarching themes — innovation and thematic investing — will likely drive that growth, Paglia said.
“Innovative companies were the ones that succeeded in 2020,” she said in a nod to Invesco’s recently launched Nasdaq Next Gen 100 ETF (QQQJ) and Nasdaq 100 ETF (QQQM).
QQQJ and QQQM, the newest members of Invesco’s Nasdaq Innovation Suite, together have attracted over $1 billion in assets since their October launches.
“Whoever is able to innovate, whoever is able to invest in technology, development and research, is really going to succeed in 2021 and beyond,” Paglia said. “QQQJ [and] QQQM really embrace that. Everything that brings innovative ideas to the market is likely going to find a place in those funds and in investors’ portfolios.”
Thematic funds, too, will “be the big winners of 2021 and beyond,” Paglia said.
“If you want to know what investors are going to buy, you just have to look at how they behave,” she said. “They are very conscious about their social responsibility, environmental responsibility. They don’t just want to look at returns. They want to look under the hood, so to speak. They want to know exactly what they are financing by buying an ETF.”
Invesco’s environmentally focused ETFs include its popular Solar ETF (TAN), Global Clean Energy ETF (PBD) and the Invesco WilderHill Clean Energy ETF (PBW). TAN and PBW are both up over 220% in the last 12 months. PBD is up roughly 150%.
“With thematic ETFs, it’s easier for investors to bring their passion to life because they look at a theme — solar, water, clean energy — and they can invest 100% in that,” Paglia said.
Disclosure: Invesco is the sponsor for CNBC’s “ETF Edge.”