FocusShares To Promote ETFs—Finally

Alex Ulam and Olly Ludwig
March 12, 2012

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VOOVanguard S&P 500
SCHBSchwab U.S. Broad Market
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A year after launching 15 low-cost ETFs, FocusShares gets around to telling the world about them.


Almost 12 months after launching its suite of 15 low-cost ETFs, Scottrade unit FocusShares is finally rolling out an advertising campaign extolling the virtues of its low-priced funds—a sensible idea considering its asset-gathering seems to be lagging that of its competitors in the low-cost fund space.

While Scottrade’s ad campaigns in the past year have mentioned ETFs from time to time, they’ve never prominently featured its 15 Focus Morningstar funds or the fact that some of them are not only the cheapest on the market, but that Scottrade clients can trade them commission free. It’s not clear why Scottrade waited so long to more aggressively promote the line of ETFs.

The new campaign, which began rolling out earlier this year, will include new print and online advertising and national cable television sponsorships targeted at investment advisors, the Scottrade unit said today in a press release. It will emphasize the low costs of the funds, their Morningstar indexes and Scottrade’s strong commitment to FocusShares and its products.

FocusShares has gathered $92.5 million in assets in the nearly 12 months its 15 funds have been on the market. The fairest comparison to FocusShares is probably Charles Schwab, because both San Francisco-based Schwab and St. Louis-based Scottrade are online discount brokers. Vanguard, the third noteworthy low-cost ETF sponsor, is a different case, in part because its ETF business is already so big.

Schwab’s proprietary ETFs gathered about $2.16 billion in their first year of operation after the firm rolled out its first exchange-traded funds in November 2009. Also, Schwab has pulled in $2.58 billion since the FocusShares ETFs were launched in late March 2011, according to data compiled by IndexUniverse. Schwab’s ETF assets now total $6.39 billion, while Vanguard’s are just shy of $200 billion.

Scottrade acquired FocusShares in 2010—about two years after FocusShares shuttered a number of niche ETFs in the wake of the 2008 market crash.

The 15 new ETFs launched, once Scottrade had become FocusShares’ parent, cover a broad swath of U.S. equities, and are segmented by size and sectors. The funds have been steadily—if slowly—gathering assets but, as noted, not at the pace of either Schwab or Vanguard.

Changing Competitive Landscape

While each of the 15 FocusShares funds, at the time they launched, were either the lowest priced or tied for the lowest in their respective categories, competitors have moved in and undercut some of those advantages.

Still, the Focus Morningstar U.S. Market Index ETF (NYSEArca: FMU) and the Focus Morningstar Large Cap ETF (NYSEArca: FLG) are both the lowest-priced funds in their categories.

FMU’s 0.05 percent annual expense ratio undercuts the Schwab U.S. Broad Equity ETF (NYSEArca: SCHB), which has a total expense ratio of 0.06 percent.

FLG’s price also beats out its closest competitor in the same investment category, the Vanguard S&P 500 ETF (NYSEArca: VOO), which also has a total expense ratio of 0.06 percent.

Incidentally, Vanguard’s low-cost funds have clearly attracted investors, helping to make ETF asset-gathering at the Valley Forge, Pa.-based firm the most successful of any U.S. ETF firm in the past two years, according to data compiled by IndexUniverse.



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