Key Trends In ETF Issuer Growth
U.S.-listed ETF assets have grown about 23% year to date to $4.2 trillion thanks to a combination of strong net asset inflows and market performance. That pace of growth has been pretty steady in recent years, but it hasn’t been evenly distributed among ETF issuers.
The most recent ETF Issuer League Table—our compilation of where issuers rank in total ETF assets under management—shows a few interesting things this year.
1. Same Top 3 Remain At Top
The first—and most obvious—observation, is that BlackRock (iShares ETFs), Vanguard and State Street Global Advisors continue to dominate, with the biggest footprints in this market.
So far in 2019, the three firms at the top saw combined AUM grow nearly $670 billion. That amounts to about 85% of all the growth—tied to flows and performance—seen this year in the U.S. ETF industry. In other words, of every $1 of new growth the ETF market enjoyed in 2019, $0.85 was at the hands of three issuers.
What’s more, about half that combined growth was in BlackRock’s iShares ETFs alone, which today command $1.64 trillion of all assets tied to U.S.-listed ETFs. That’s just over a third of the entire ETF market.
BlackRock’s dominance is old news, and still uncontested. But when you are a giant, it takes a lot more to move the needle. From a percentage growth perspective, despite stellar results, BlackRock’s footprint increased exactly the same as the broader ETF market in 2019: 23%.
No. 2 issuer Vanguard, which crossed the $1 trillion-in-assets line this year, grew its ETF presence by 28% so far this year, while State Street Global Advisors—once the second largest issuer and the pioneer behind strategies such as the SPDR S&P 500 ETF Trust (SPY) and the SPDR Gold Trust (GLD)—saw its asset base grow about $109 billion in 2019 to $677 billion in total assets, a 19% jump from where it stood at the end of 2018.
None of these numbers is particularly surprising. State Street has some of the most used and traded ETFs in the market, but BlackRock has done a phenomenal job of reducing fees through lineups such as the “Core” ETFs and innovating with the “Evolve” family of funds, attracting new assets. Vanguard, meanwhile, has retained its position at the helm of low-cost passive investing with a steady hand and a strong following.
It’s hard to imagine what could dethrone these firms’ leadership.
2. Big Banks Showing Serious Muscle In The ETF Business
Big asset managers like J.P. Morgan and Goldman Sachs are still relatively young in the ETF game, but they aren’t goofing around.
J.P. Morgan is already the 10th largest ETF issuer in the U.S., with $31 billion in total assets. So far in 2019, the firm saw its ETF asset base grow a strong 55%. Yes, in dollar terms we are talking about roughly only $11 billion in net new money, but a 55% growth rate in one year is nothing to scoff at.
With 34 ETFs on the market today, J.P. Morgan is behind $8 billion-plus strategies already, such as the $9.8 billion JPMorgan Ultra-Short Income ETF (JPST) and the $4.5 billion JPMorgan BetaBuilders Japan ETF (BBJP), among others.
Goldman Sachs, meanwhile, has expanded its footprint in the ETF market this year by a whopping 62%. The firm behind 22 ETFs now commands about $16.2 billion in total assets, putting it at the No. 12 spot in the issuer ranking—up four spots from last year.
The Goldman Sachs ActiveBeta U.S. Large Cap Equity ETF (GSLC) is now a $7 billion fund, the asset manager’s largest. Goldman’s focus on low-cost, competitive offerings has worked well, as has its sizable in-house asset base—something firms like these have been able to tap into to quickly grow their ETF businesses.
3. WisdomTree Struggling To Keep Up
WisdomTree is a publicly traded ETF-only company—the only one of its kind. Because of that, some like to associate its health with that of the broader ETF market. If that were the case, you could say things would not be looking too good for ETFs.
Why? WisdomTree has had a challenging year (or two), seeing total AUM grow only about $4 billion in 2019, or 11% from year-end 2018 levels. The company’s asset growth has not kept pace with the industry.
WisdomTree, which closed nine ETFs in 2018 and eight ETFs this year, dropped one spot in the ETF issuer ranking in 2019, sitting now at No. 8 with $39 billion in total assets and surpassed by VanEck.
The WisdomTree U.S. MidCap Dividend Fund (DON) is WisdomTree’s biggest fund right now, with $4 billion in assets, and the firm remains well-known for its lineup of dividend-focused ETFs, including funds such as the WisdomTree US Quality Dividend Growth Fund (DGRW). These strategies have attracted some new assets for the firm this year.
But WisdomTree is also widely known for its currency-hedged ETFs, a segment that has been largely out of favor in 2019. The WisdomTree Europe Hedged Equity Fund (HEDJ) and the WisdomTree Japan Hedged Equity Fund (DXJ), among others, were net asset losers year to date.
4. The Mighty Small
There are 120 ETF issuers in the market, and two-thirds of them have less than $1 billion in ETF assets each. The smaller their asset base, the easier it is to have impressive percentage growth any given year.
That said, some of these smaller players are carving serious inroads into the ETF market, even if we are talking about millions—not billions—in growth. Companies like Legg Mason, GraniteShares, Amplify and ARK have practically doubled their ETF asset bases this year.
These companies are behind interesting—sometimes first-of-a-kind—funds that fill investor demand for specific access, such as the online retail-focused Amplify Online Retail ETF (IBUY); the GraniteShares Bloomberg Commodity Broad Strategy No K-1 ETF (COMB); the ESG-focused ClearBridge Large Cap Growth ESG ETF (LRGE) and the ARK Innovation ETF (ARKK), which is now a $1.7 billion ETF.
Among these smaller issuers, look at what Innovator Capital Management has managed to accomplish. The company has gone from “zero to 60” in a matter of months, quite literally.
Innovator launched its first defined outcome ETF a little over a year ago, the Innovator S&P 500 Buffer ETF – July (BJUL), and today manages $2.1 billion in total assets. Since January, Innovator has seen its asset footprint grow threefold in what’s perhaps the fastest growth among issuers this year.
Innovator’s impressive success is tied simply to a good product lineup. The company’s defined outcome family of funds known as Buffer ETFs clearly filled a void, and met demand at a time when investors were looking for ways to insure portfolios in the event of a recession.
With all the competition for shelf space among 2,200-plus U.S.-listed ETFs, Innovator and these smaller—and quickly growing—issuers show that there’s still room for great new investment ideas, packaged in easy-to-implement ETFs for a great price.
Contact Cinthia Murphy at cmurphy@etf.com
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