Such index-tracking entities have proliferated mightily over recent years with total AuM hitting a record of more than $10 trillion in late 2021, but a poor month for stocks in January saw that number fall back.

The global industry for exchange traded funds and products – useful barometers for what investors think about markets – gathered $76.4 billion of net inflows in the first month of 2022 when markets were buffeted by worries such as over Ukraine and rising inflation.

Figures from ETFGI, a firm tracking the space, showed that total assets invested in the sector fell by 3.9 per cent from a record level of $10.27 trillion at the end of 2021, reaching $9.87 trillion. 

The pace of net inflows in January was slightly lower than the net inflows of $85.38 billion gathered in the same month a year earlier. Over the past 12 months, a total of $1.29 trillion has entered the sector.

The market for these funds, which typically track indices and give holders a relatively cheap and easy way to tap into markets, could not shrug off chillier economic winds.

“The S&P 500 decreased by 5.17 per cent in January. Developed markets, excluding the US, experienced a loss of 5.33 per cent in January. All countries in developed markets experienced losses, with New Zealand suffering the biggest loss of 14.35 per cent. Emerging markets decreased by 0.94 per cent during January. Chile (up 12.44 per cent) and Colombia (up 12.36 per cent) gained the most, whilst Russia (down 8.74 per cent) and Poland (down 4.82 per cent) witnessed the largest declines,” Deborah Fuhr, managing partner, founder and owner of ETFGI, said. 

These index-tracking structures have proliferated massively over the past two decades, giving investors the ability to tap into markets in one hit, or to fine-tune exposures to themes, sectors and sources of return in a far simpler way than before. The growth of ETFs proved particularly strong in the decade after the 2008 financial crisis when cheap liquidity helped markets rise, playing to the strengths of beta investing as opposed to alpha-pursuing structures such as active funds. (The trend of “smart beta” funds tries to create a hybrid, in which investors can target specific sources of return in a systematic way.)

ETFs are typically open-ended, index-based funds. ETPs, on the other hand are like ETFs in the way that they trade and settle, but do not use an open-end fund structure.