👀 Why investors love ETFs

What’s going on here?

ETFs (exchange-traded funds) are on a roll, hitting record-high investment levels.

What does this mean?
ETFs have been having a bit of a glow up lately, with an increasing number of investors treating the funds as portfolio-building blocks. Case in point: there’s been more money poured into the global ETF market than taken out every month for four years straight. Rallying stock markets are pumping up the funds too, increasing the value of the assets invested in ETFs and luring more investors in with the promise of tidy returns. That combination has helped ETFs smash records, globally and across individual markets. In fact, data from consultancy ETFGI shows that the amount of money invested in ETFs globally hit a new high note of $10.32 trillion last week, breaking the $10.26 trillion record set at the end of 2021.

Why should I care?

Zooming in: Watch this space.

Plenty of analysts think the ETF industry’s set to keep on growing, and they could be right. See, the rise of actively managed ETFs – which work like stock-picking mutual funds – could help the industry grow beyond its traditional index-tracking roots. And that’s not to mention the red-hot popularity of thematic ETFs, which invest in long-term trends, as well as ones focusing on environmental, social, and corporate governance (ESG) factors.

The bigger picture: The feeling’s not mutual.

ETFs are outpacing other fund structures too. Investors poured $609 billion more into US-listed ETFs than they took out last year, while they yanked a record $1.1 trillion out of US-based mutual funds. That makes sense: unlike mutual funds, ETFs trade on a stock exchange, are more tax-efficient in the US, and are typically cheaper and a whole lot more transparent too.

What’s going on here?

AstraZeneca, the UK’s pharmaceutical titan, is reportedly shooting for the stars with a new Chinese gambit.

What does this mean?

According to the Financial Times, AstraZeneca is drafting some big new plans: spinning off its Chinese business and listing it separately on the Hong Kong or Shanghai stock exchange. The game plan here is to keep control of the business – which brought in 13% of AstraZeneca’s total revenue last year – while making it a neat-and-tidy separate entity. And that could be a pretty wily move: first, it offers AstraZeneca a separate treasure chest of capital to fund growth in China – a populous, aging, and increasingly lucrative market for pharmaceutical companies. Second, a Chinese listing could help AstraZeneca win faster approvals for drugs developed in the country. And last but not least, it could provide AstraZeneca’s China business with a handy shield from the world’s increasingly messy geopolitical squalls too.

Why should I care?

The bigger picture: Pivots and politics.

That third reason is arguably the biggest one – and it hints at a possible sea change for multinationals, as friction between China and the West mounts. And word on the street is that every multinational with a footprint in China is contemplating a similar move. That’s not just boardroom gossip: venture capital powerhouse Sequoia Capital, for one, recently announced that it’s going to split in three, separating its Chinese and US operations as tensions grow between the world’s two biggest economies.

For markets: Tokyo drift.

Japanese stocks might just find themselves in the spotlight as this drama unfolds. See, California-based wealth management firm Bailar thinks that the Land of the Rising Sun could bask in the glow of a trend they’ve dubbed “friend-shoring”. In other words, as tensions rise with China, European and US companies just might shift their trade reliance to Japan, turf that’s currently free of any nasty geopolitical storms.