In a year like 2017, when ETFs have attracted a record $400 billion in net inflows in less than 11 months, we are reminded of the dominance of a few issuers.
At the top is BlackRock’s iShares, commanding more than $1.3 trillion in U.S.-listed ETF assets spread across 348 different funds. At No. 2 is Vanguard, with more than $820 billion in ETF assets in 71 different ETFs. These two firms alone have gathered more than 70% of all fresh net inflows this year, according to Bloomberg data, and dominated the top creations list.
But it doesn’t take having almost 350 ETFs to make it in this business.
There are a few notable one-hit ETF players in the space that are making it, issuers that have been growing their footprint based entirely on a lineup of a single ETF.
The most successful of these one-hit wonders is Robo Global, a small outfit of financial and robotics professionals tracking the global industry of robotics and automation.
This group created an index and brought to market through third-party provider Exchange Traded Concepts the ROBO Global Robotics and Automation Index ETF (ROBO) in October 2013.
ROBO is a bona fide one-hit wonder, with $1.8 billion in assets under management in a segment that’s still sparsely populated with competitors. First-to-market is perhaps ROBO’s biggest trump card, given that it costs 0.95% in expense ratio, while its main competitor, the Global X Robotics & Artificial Intelligence ETF (BOTZ) costs 0.68%. But BOTZ didn’t launch until 2016—some three years later—and it focused exclusively on developed markets. BOTZ has $1.3 billion in assets.
Robo Global is only one of the firms finding traction in the ETF market with only one product. There are several other firms, each behind a single ETF, that have managed to attract $100 million or more to their funds. They include:
SNLN has gathered $575 million in assets since inception in 2012. The fund owns about 100 liquid, floating-rate, high-yield senior loans issued by banks to companies. SNLN is Highland Capital’s only ETF game, and it’s doing well if you consider the strategy has serious competition from the heavyweight $8.3 billion PowerShares Senior Loan Portfolio (BKLN), among others.
EMQQ, the firm, is run by industry veteran Kevin Carter, and includes the likes of Burton Malkiel and Richard Kang on its advisory committee.
Also brought to market through third-party provider Exchange-Traded Concept, EMQQ, the ETF, has attracted some $364 million in assets. In 2017, the fund has delivered an impressive performance relative to some of the larger emerging market ETFs in a year where all eyes have been on international equities. A net of $271 million in assets flowed into EMQQ this year, landing it on many people’s radars.
FFTY is an interesting fund that originally was designed as part passive/part active, picking 50 leading growth companies that trade on U.S. markets based on fundamental and technical ratings, and then reweighting this price-weighted index based on the portfolio manager's ranking system.
That original design seemed to be boding well for a strategy that, in just over two years, grew into a $230 million ETF. But last week, FFTY changed its strategy and went fully passive, tracking the IBD 50 Index. It isn’t a dramatic change in exposure, but it remains to be seen how that will impact its performance going forward, and how well investors take to it.
OUNZ first came to market in 2014, taking on giants like the SPDR Gold Trust (GLD) and the iShares Gold Trust (IAU) as another physical gold ETF, but with a twist: OUNZ allowed investors of any size to take delivery of physical gold at any time for a fee. That delivery mechanism remains unique to OUNZ, and something that allows the fund to stand out against its peers.
Still, asset-gathering pace had been somewhat slow in early days, and in 2015, Merk partnered up with VanEck, which took the role of marketing agent for OUNZ. Today, OUNZ, which remains Merk Investments’ only ETF, has grown to $135 million in assets.
Charts courtesy of StockCharts.com
The list of one-ETF companies goes on. There are more than 20 other emerging ETF issuers looking to conquer that $100 million milestone with their first and only ETFs.
Their efforts show that carving a niche in an increasingly crowded ETF market is a challenge, particularly in the face of companies with massive scale such as iShares, Vanguard and State Street Global Advisors. But it can be done with the right mix of innovation, price, distribution—and perhaps just a little bit of luck.
Contact Cinthia Murphy at [email protected]