ETF Of The Year/Best New ETF/Best New/International/Global Equity ETF
WINNER: JPMorgan BetaBuilders Japan ETF (BBJP)
As often happens, 2018’s “ETF of the Year” racked up two other important awards, taking the “Best New ETF” and “Best New Global/International ETF” prizes as well.
The winning JPMorgan BetaBuilders Japan ETF (BBJP), which now has $4 billion in assets, isn’t a particularly exciting product on its surface. The ETF provides low-cost exposure to Japan’s market via a cap-weighted index—but the “who” is pretty important in this case.
Financial Giant In New Territory
J.P. Morgan is one of the largest and best-known financial institutions in the world. When it got serious about launching its own ETFs in 2014, the company jumped feet first into the multifactor smart-beta trend that was sweeping the industry at the time, launching several ETFs for its “Diversified Return” series.
However, those funds didn’t gain the traction you’d expect from an issuer as well-known as J.P. Morgan—currently only one floats above the $1 billion mark: the JPMorgan Diversified Return International Equity ETF (JPIN).
From there, J.P. Morgan moved into bond and alternatives strategies, many of which relied on active management, as well as launching its own suite of index-based single-factor funds. The investment management firm has now pivoted to the idea of internally distributed low-cost beta. This is where it seems to have really found its footing in the ETF space.
BetaBuilder Building Blocks
Last year, J.P. Morgan launched BBJP in June, alongside another country fund, the now $3 billion JPMorgan BetaBuilders Europe ETF (BBEU) and the $136 million JPMorgan BetaBuilders MSCI U.S. REIT ETF (BBRE). The two country ETFs quickly began to gather assets, BBJP in particular.
Within roughly one month, BBJP had accumulated more than $1 billion, making its ascent to the billion-dollar club the second-fastest ever among U.S.-listed ETFs. As of mid-February 2019, the fund had grown to nearly $4 billion in assets after less than a year of trading.
When it made its debut, BBJP was notable because it was launched by financial giant J.P. Morgan, and came with a 0.19% expense ratio. That made it less than half the 0.47% charged by the $16 billion iShares MSCI Japan ETF (EWJ).
BlackRock’s iShares arm has maintained hegemony over the country ETF space for more than 20 years, with few serious challengers. Now J.P. Morgan—as shown by BBJP—has become the most direct threat to BlackRock’s country ETF lineup.
Moreover, J.P. Morgan has clearly created its country and regional ETFs for its own use in strategies for the firm’s institutional and high net worth clients, and BBJP is just the most successful of those funds.
Since launching BBJP and its cohorts, J.P. Morgan has expanded the family to include the $1.2 billion JPMorgan BetaBuilders Developed Asia ex-Japan ETF (BBAX) and the $2.3 billion JPMorgan BetaBuilders Canada ETF (BBCA).
Three of the issuer’s top five ETFs are also members of its small but growing BetaBuilders family. J.P. Morgan is far and away the largest shareholder in each of the four geographically focused BetaBuilders, often owning 50% or more of the funds’ respective assets for its clients.
Currently, the firm or its clients are behind roughly three-quarters of the assets invested in BBJP, which is actually a smaller fraction than in 2018, when J.P. Morgan assets constituted up to 96% of the fund’s bulk. BBJP is perhaps the latest and greatest example of a trend Bloomberg’s Eric Balchunas has described as “BYOA” (bring your own assets).
Bring Your Own Assets
While Franklin Templeton has offered a similar low-cost challenge with its own extensive lineup of even cheaper country ETFs, the scope of J.P. Morgan’s financial operations means the firm has even greater synergies to leverage.
And a lot of those assets seem to have come from EWJ, which hemorrhaged more than $2 billion in outflows in the second half of 2018. Clearly, J.P. Morgan has shifted at least some of its holdings from the iShares fund into its own product, but it’s possible that other EWJ investors decided to act on BBJP’s lower price and the liquidity that J.P. Morgan could guarantee in its product.
Either way, BBJP has seen sizable inflows almost every month since its launch and no outflows.
Aside from EWJ, BBJP’s other big competitor is the Franklin FTSE Japan ETF (FLJP), which comes with an expense ratio of 0.09%, less than half the price of BBJP and less than one-fifth the price of EWJ. However, as well-known as Franklin Templeton is, it doesn’t have the same massive operations or ability to shift assets around as does J.P. Morgan. It currently has a respectable—but much smaller—$1.9 billion in assets under management.
There’s not much difference between the three funds beyond price. They even have almost all their top 10 holdings in common in similar proportions. EWJ’s index is from MSCI, while FLJP’s is from FTSE. BBJP tracks a benchmark from Morningstar. All three are cap-weighted.
But BBJP is gaining ground on EWJ pretty rapidly. After less than a year of trading, it’s currently one-fourth the size of EWJ. Flows were flat for the month of February, after seven-straight months of inflows.
It’s no surprise BBJP has claimed not only ETF of the Year, but also Best New ETF and Best New International/Global Equity ETF.
MOST INNOVATIVE NEW ETF (TIE)
WINNER: Breakwave Dry Bulk Shipping ETF (BDRY)
WINNER: Innovator S&P 500 Buffer ETFs (Series) (BJUL)
Innovation in ETFs can come in many forms, and in 2018, it came in the form of new and novel access. And it happens more often than you’d think. The award for most innovative ETF of 2018 ended up a tie between two products.
It may seem difficult to get excited about the Breakwave Dry Bulk Shipping ETF (BDRY), which is tied to dry bulk freight, but thanks to BDRY, any investor with a brokerage account can now access a segment of the market that’s key to the global commodity space.
Dry bulk freight refers to the transportation of dry cargo such as grain and iron ore. BDRY is an index-based portfolio that invests in near-dated freight futures contracts on three dry bulk indices, offering investors a good proxy for dry bulk shipping rates. However, it’s not exactly cheap, with an expense ratio of 3.09%.
The other most innovative ETF is the Innovator S&P 500 Buffer ETF - July (BJUL)—one of the first in a series of similar ETFs designed with downside protection in mind. BJUL is an actively managed ETF that offers access to the price return of the S&P 500 while capping gains and limiting potential losses in a so-called buffer strategy.
What makes BJUL and this entire series innovative is the extensive use of FLEX options to deliver a defined outcome to investors in a way only previously really available in structured products and annuities.
BEST NEW U.S. EQUITY ETF
WINNER: Vanguard ESG U.S. Stock ETF (ESGV)
ESGV offers socially responsible investing in a uniquely Vanguard package. With over 1,500 stocks, the ETF boasts broad diversification at a price point of just 0.12%, making ESGV at its launch the cheapest ESG U.S. equity ETF on the market (and one of the cheaper total U.S. market ETFs, period).
The result is a dirt-cheap total market fund with performance nearly identical to that of Vanguard’s $108 billion Vanguard Total Stock Market ETF (VTI), but without any of the stocks that give ESG-minded investors pause. So rather than having to choose between principles and performance, investors could use ESGV as a replacement for some or all of their existing VTI allocation, headache-free.
When Vanguard enters a space, investors usually pay attention. In less than six months on the market, ESGV has already passed $165 million in assets, making it one of the largest socially responsible ETFs, and one of the fastest-growing.
If anybody could make ESG investing go mainstream, it’s Vanguard. We’re eager to see if ESGV lives up to that potential.
BEST NEW U.S. FIXED-INCOME ETF
WINNER: iShares ESG U.S. Aggregate Bond ETF (EAGG)
We hear about environmental, social and governance (ESG) all the time when it comes to stocks. Principles-based investment strategies have been quietly growing in the equity space. But when it comes to fixed income, the same can’t be said. There’s been little mention of using ESG criteria for deciding which bonds to hold in a portfolio.
The iShares ESG U.S. Aggregate Bond ETF (EAGG), winner of the Best New U.S. Fixed-Income ETF award, aims to change that. In its 4 1/2 months on the market, it’s picked up $56 million in assets, no doubt thanks to its association with the $58 billion iShares Core U.S. Aggregate Bond ETF (AGG), the largest fixed-income ETF on the market.
EAGG takes the same Bloomberg Barclays U.S Aggregate Bond Index that’s tracked by AGG and puts it through an ESG filter. Aspects like Treasuries and mortgage-backed securities remain big parts of the portfolio, as they’re seen as ESG-neutral. But bonds of corporations and other institutions are weighted based on their ESG score.
Some bonds of entities involved in tobacco and weapons are excluded. But the ETF optimizes its holdings to maintain marketlike exposure to the investment-grade bond space, giving investors the ability to support ESG causes in their fixed-income portfolio without deviating too much from their market.
BEST NEW INTERNATIONAL/GLOBAL FIXED-INCOME ETF
WINNER: Vanguard Total World Bond ETF (BNDW)
When it comes to bonds, Vanguard has a history of shaking things up. The firm launched the first bond index fund in 1986, entering an asset class that had been the sole purview of active managers. More than three decades later, actively managed bond funds still dominate the landscape, but fixed-income index funds—thanks in large part to ETFs—are making great strides.
Helping their cause is a new offering from Vanguard, the Vanguard Total World Bond ETF (BNDW), winner of the Best New International/Global Fixed-Income ETF award. The $100 million BNDW may not be as revolutionary as the Vanguard Total Bond Market Index Fund was 33 years ago, but it still deserves praise and recognition for providing investors with exceptionally low-cost exposure to the global investment-grade bond market.
BNDW gets its exposure by holding two other Vanguard ETFs, the Vanguard Total Bond Market ETF (BND), a U.S. investment-grade bond ETF, and the Vanguard Total International Bond ETF (BNDX), an ex-U.S. investment-grade bond ETF.
It doesn’t charge anything extra on top of the fees for those two funds, meaning investors get to hold the equivalent of nearly 13,000 bonds across the globe for a mere 0.09% per year.
BEST NEW COMMODITY ETF
WINNER: iShares Bloomberg Roll Select Commodity Strategy ETF (CMDY)
“No-K-1” ETFs have been a big trend in the commodity space recently—and for good reason. Few investors want to deal with the potential tax headaches that come with receiving a Schedule K-1 form, a requirement for anyone holding exchange-traded products structured as commodity pools (as many commodity ETPs are).
K-1 forms can be a hassle, often leading to late tax filings and higher tax bills for investors. Why deal with that when you can buy a no-K-1 commodity ETF, which provides nearly identical exposure without the dreaded K-1?
One such fund is the iShares Bloomberg Roll Select Commodity Strategy ETF (CMDY), winner of the Best New Commodity ETF award of 2018. It holds a broad basket of commodity futures, but is structured as a traditional 1940 Act fund.
In addition to doing away with K-1s, the awards committee liked that CMDY, though technically active, tracks the Bloomberg Roll Select Commodity Index, an index of 20 commodities, covering the agriculture, energy and metals sectors.
Commodities in the index are weighed based on production and liquidity. Additionally, futures contracts are selected to minimize contango and maximize backwardation, which should aid returns over time relative to a vanilla commodity ETF.
BEST NEW ALTERNATIVES ETF
WINNER: VanEck Vectors Real Asset Allocation ETF (RAAX)
VanEck has long been breaking ground in real assets investing, and in 2018, it did it again with the launch of the actively managed VanEck Vectors Real Asset Allocation ETF (RAAX).
Real assets are often touted as good portfolio diversifiers as well as being great for hedging against rising inflation, even if they’re also known as pretty volatile assets.
RAAX delivers a broad mix of real assets such as REITs, commodities, natural resource equities, MLPs and infrastructure in a portfolio consisting primarily of other ETFs. Unique to this strategy is its laser focus on defense—RAAX is designed with downside risk management and lower volatility in mind.
To that end, the portfolio manager turns to various technical, sentiment and macro indicators to make allocation decisions across various assets, looking for those assets with better expected returns. Those allocation decisions include the ability to move the portfolio up to 100% into cash or cash equivalents when market turbulence—volatility—picks up and downside protection takes over.
RAAX isn’t so much cheap as much as it is competitively priced in its segment. The fund has an expense ratio of 0.64% and is part of VanEck’s Guided Allocation ETF suite.
BEST NEW ASSET ALLOCATION ETF
WINNER: WisdomTree 90/60 U.S. Balanced Fund (NTSX)
The “Best New Asset Allocation ETF” is awarded to the most important ETF launched in 2018 that combines exposure to multiple asset classes, and for 2018, that was the WisdomTree 90/60 U.S. Balanced Fund (NTSX).
NTSX is an actively managed portfolio of U.S. equities and U.S. Treasury futures contracts that uses futures contracts to construct what is effectively a leveraged 60/40 portfolio of U.S. equities and Treasuries. The fund places 90% of its assets in U.S. equities and the remaining 10% in Treasury futures contracts that are then used to collateralize a U.S. Treasury futures portfolio that equates to notional exposure of 60% of the portfolio.
The resulting exposure is equivalent to a 90/60 allocation to stocks and Treasuries, or a 60/40 allocation leveraged 150%. The equity allocation will generally consist of U.S. large-caps, weighted by market cap. Treasury exposure will range in maturity between two and 30 years, with a target duration of three to eight years.
The ETF is cheap for an asset allocation ETF, with an expense ratio of 0.20%. It uses derivatives to “shape returns,” which is a real pattern seen in recent launches. The strategy provides “leverage,” but in a controlled way. While the fund is still in its early days, NSTX has effectively navigated a tricky three-month market window to outperform both the S&P 500 and Treasuries, its two target markets.
Ultimately, NTSX offers investors a potentially important portfolio tool in about the cheapest way possible.
BEST NEW SMART-BETA OR FACTOR ETF
WINNER: iShares Evolved U.S. Sector ETFs (Series) (IECS)
Artificial intelligence is at the core of what makes the iShares Evolved U.S. Sector ETFs the best in smart-beta innovation in 2018.
The Evolved sector series includes seven different funds in all—the iShares Evolved U.S. Consumer Staples ETF (IECS) is a mere representative of the entire series for the purpose of this award.
The other funds in the family include the iShares Evolved U.S. Discretionary Spending ETF (IEDI), the iShares Evolved U.S. Healthcare Staples ETF (IEHS), the iShares Evolved U.S. Innovative Healthcare ETF (IEIH), the iShares Evolved U.S. Financials ETF (IEFN), the iShares Evolved U.S. Technology ETF (IETC) and the iShares Evolved U.S. Media and Entertainment ETF (IEME).
These are actively managed ETFs that offer U.S. sector exposure that’s anything but traditional. With the use of AI—including machine learning, natural language processing and text analysis—iShares sifts through big data to group similar companies based on key business drivers in a methodology that stands in contrast to the more traditional revenue-based screens applied to sector investing.
The entire suite relies on how companies describe themselves and their business in publicly available materials, looking to tackle the reality that, in today’s highly connected economy, some companies may fit in more than one traditional GICS sector classification.
In the Evolved series, any given company may fall into more than one sector portfolio, and is weighted accordingly. It’s a new way to slice and dice sectors that are dynamic and ever-changing. IECS and its counterparts each have a 0.18% expense ratio, or $18 per $10,000 invested.
BEST NEW ACTIVE ETF
WINNER: Vanguard U.S. Multifactor ETF (VFMF)
Despite being known mainly for its pioneering index funds, Vanguard has a long history in active management on its mutual fund side. But until recently, it hadn’t introduced any actively managed ETFs. So it was big news when the issuer rolled out a suite of actively managed factor funds in February 2018.
The largest of these is the Vanguard U.S. Multifactor ETF (VFMF), which in a way is a combination of the other factor funds the issuer has launched, investing as it does in U.S. equities exhibiting value, momentum, quality and low-volatility characteristics. The fund seeks long-term capital appreciation.
Like the other ETFs in the Vanguard factor family, VFMF selects its holdings from across the size spectrum of U.S. stocks, and relies on a quantitative model to evaluate potential holdings. The fund uses a rules-based screen to ensure diversification and limit exposure to certain less liquid stocks.
VFMF doesn’t simply hold the single-factor ETFs in the Vanguard family as an ETF-of-ETFs; it’s separately managed and has its own discrete portfolio of equities. The fund’s potential holdings are scored on their exposure to VFMF’s targeted factors and are selected for inclusion based on the underlying model.
The pricing for VFMF is extremely low, at 0.18%. The only actively managed U.S.-focused ETFs that are cheaper are VFMF’s close relatives, the Vanguard single-factor funds, which all charge 0.13%, and the PGIM QMA Strategic Alpha Large-Cap Core ETF (PQLC), which charges 0.17%.
BEST NEW ESG ETF
WINNER: Goldman Sachs JUST U.S. Large Cap Equity ETF (JUST)
In an increasingly “greenwashed” field of environmental, social and governance (ESG) funds that are socially responsible in name only, the Goldman Sachs JUST U.S. Large Cap Equity ETF (JUST) offers a truly unique take on what it means to invest with a conscience.
As a partnership between Goldman Sachs and Paul Tudor Jones II’s nonprofit JUST Capital, JUST is designed to be a bellwether of investors’ priorities.
The fund’s benchmark starts with a series of public opinion surveys, in which U.S.-based respondents identify the business practices that most matter to them—everything from how companies treat their workers to the eco-friendliness of their supply chain.
From there, large-cap companies are ranked and weighted by the behaviors that respondents said were most important to them, using roughly 120,000 discrete data points from a wide range of sources.
Each year, the index reconstitutes the weightings, based on that year’s survey results—meaning that JUST evolves as investors’ concept of social justice changes, so that its portfolio always reflects whatever matters most to investors in the moment it matters most. One year, the portfolio might weight more toward, say, firms known for prioritizing job creation within disadvantaged communities; another, it might more heavily favor firms with strong environmental records.
Its methodology makes JUST an ESG ETF that’s not just for the people, but by the people.
THEMATIC ETF OF THE YEAR (TIE)
WINNER: VanEck Vectors Video Gaming and eSports ETF (ESPO)
WINNER: EventShares U.S. Policy Alpha ETF (PLCY)
There was a tie for Thematic ETF of the Year, with the VanEck Vectors Video Gaming and eSports ETF (ESPO) and the EventShares U.S. Policy Alpha ETF (PLCY) each claiming the prize. Both funds are the first of their respective kind, and offer a unique take on different parts of the U.S. market.
ESPO is a global pure-play fund that covers companies that generate at least half of their revenues from the video gaming and esports-related industries, including those operating as hardware and software providers, game developers, league operators and providers of platforms, among other participants in the space. The fund holds a portfolio of 26 securities, with heavy weightings in game developers and hardware companies, especially those based in the U.S., China, Korea and Japan.
PLCY is an actively managed fund that chooses its holdings based on how the companies will be affected by U.S. government regulations, trade policies and fiscal spending. Its portfolio consists of 50-100 companies held long or short based on their exposure to U.S. policies around such topics as spending, defense, health care, trade agreements, tariffs, industry regulation, environment or taxes. Launched in 2017, PLCY was revamped in April 2018 to combine the objectives of three different funds focused on policy from a partisan and tax perspectives.
ETF ISSUER OF THE YEAR
WINNER: J.P. Morgan Asset Management
Slowly but surely, J.P. Morgan Asset Management built up its presence in the ETF pool over time, only to punctuate 2018 with a big splash.
The firm, known globally as one of the most successful active managers, has been involved for years in the ETF space, mining the alternative and fixed-income corners of the market. However, 2018 was a literal turning point for the firm’s product development.
The launch of the plain-vanilla—and cheap—indexing suite called “BetaBuilders” not only significantly cut the cost of owning foreign-country equity ETFs, assets flowed in quickly. Clearly, there was a plan underlying the launch of these ETFs that attracted more than $10 billion in new assets under management (AUM) across five new funds in less than a year.
At the end of 2017, the ETF arm of J.P. Morgan had $6.2 billion in AUM. One year later, the firm had more than $20 billion on the back of the “BetaBuilder” suite, which is simply basic equity indexes covering mostly individual countries at half the market rate charged by competitors.
As of March 1, 2019, the J.P. Morgan Asset Management ETF AUM has grown to $26 billion. Costs matter, and knowing there’s a market for your products is obviously working for J.P. Morgan; thus, “ETF Issuer of the Year” is a well-deserved win.
We’re looking forward to what’s next from the company.
MOST INNOVATIVE ISSUER OF THE YEAR
WINNER: Impact Shares
Newcomer Impact Shares offers a spin on socially responsible investing by working directly with charities and nonprofit organizations that support specific causes to develop its funds. The firm is registered as a tax-exempt nonprofit 501(c)(3) organization, and donates 100% of its advisor fees back to the charities it works with, less operating expenses and working capital.
So far, Impact Shares has partnered with the NAACP on its initial fund, the Impact Shares NAACP Minority Empowerment ETF (NACP); the YWCA on the Impact Shares YWCA Women’s Empowerment ETF (WOMN); and the UN Capital Development Fund for the Impact Shares Sustainable Development Goals Global Equity ETF (SDGA). Partner charities act as sorts of advisory boards that set the funds’ guiding principles, while Impact Shares and the firm’s third-party index provider do the hard work of portfolio construction and management.
While there have previously been ETFs that donate some of their proceeds to a particular charity, the Impact Shares funds are the only ones to work directly with charities themselves, as well as to kick back 100% of the proceeds. In this way, investors can provide twofold support to causes they believe in, both through investing in companies that advance each fund’s targeted cause and spurring the cash donation of the management fees.
The Impact Shares are one of the most direct ways so far for investors to make a positive impact through their portfolio choices.
NEW ETF ISSUER OF THE YEAR
WINNER: Defiance ETFs
Sometimes it’s about the attitude and focus of a new ETF issuer coming to the industry rather than a quick collection of assets under management. And as its name implies, 2018’s ETF Issuer of the Year Defiance ETFs is poking at themes that are cutting edge and that the big boys seem to be ignoring.
The digital world morphs daily into new directions and themes, and Defiance recognizes this, launching ETFs to represent what’s the hot tech trend faster than established ETF players. It’s also focused on giving advisors tools to serve the next generation of investors, expected to materialize as the baby boomer generation passes on its wealth.
The firm, which is committed to passive rather than active investing, in September debuted the Defiance Quantum ETF (QTUM), a fund that invests in companies involved with quantum computing. Defiance also last year launched the Defiance Future Tech ETF (AUGR), which tracks virtual/augmented reality-related equities.
In November, Defiance filed for seven more ETFs, including the Defiance Next Gen Connectivity ETF (FIVG), which launched in March 2019. FIVG focuses on companies behind the next generation of telecom technology. Five of the other funds in the filing would target the small-cap segments of various disruptive technologies.
ETFs have been the No. 1 disruptor in the investment space for a while now, and are even defiant in some ways. Defiance ETFs is the newest entrant in the space to carry those themes.
INDEX PROVIDER OF THE YEAR
Index providers are at the heart of the ETF ecosystem. Most of the 2,200-plus U.S.-listed ETFs in the market are passively managed—tied to an index—and the bulk of the $5 trillion in global ETF assets today sits in index-based strategies.
The job of developing, constructing and managing indices is crucial to the growth and success of ETFs. MSCI has been excelling at this for more than 40 years.
The firm first entered the space in the late 1960s with global equity indices, and today it offers more than 150,000 indices with an estimated $12.5 trillion in total equity assets benchmarked to them globally (according to the company, as of late 2017). Some of its best-known indices include the MSCI ACWI and the MSCI EAFE Index.
MSCI is a powerhouse among index providers, and one that has maintained leadership in the space through its keen focus on the needs of investors, on the evolving investment landscape, on the importance of top-notch data and on continued, ongoing research made readily available to investors and market participants.
The firm is 2018’s Index Provider of the Year, but its distinction isn’t a one-off event. MSCI casts a long shadow in the ETF space, counting more than 900 ETFs from myriad providers around the globe tied to one of its benchmarks.
INDEX OF THE YEAR
WINNER: WisdomTree U.S. Multifactor Index
The potential for outperformance is a seductive thing for investors. That’s a large part of what’s driven the immense interest in factor indices in recent years. Unlike popular indices such as the S&P 500 and the Russell 2000, factor indices use criteria other than market cap to weight their constituents.
The winner of the Index of the Year award for 2018 is one of those: the WisdomTree U.S. Multifactor Index. Since it was introduced in June 2017, through the end of February 2019, the index has risen 18.7% versus the 18.4% return for the S&P 500. That’s not huge outperformance, but it’s outperformance nonetheless.
The WisdomTree U.S. Multifactor Index is more concentrated than many other broad U.S. equity ETFs, but that hasn’t yet resulted in any unusual volatility. The index weights its approximately 200 holdings based on two fundamental factors (value and quality), and two technical factors (momentum and low correlation).
The result is an index with current heavy weightings in software (14.1%), insurance (13%), health care equipment (10.2%) and technology hardware (8%).
The WisdomTree U.S. Multifactor Fund (USMF) is a $68 million ETF that tracks the index. It has an 0.28% expense ratio and a distribution yield of 1.3%.
ETF LIQUIDITY PROVIDER OF THE YEAR
WINNER: Jane Street
In some ways, “liquidity providers” is an anemic description of what competitors in this category do. Yes, they act as trading partners, transacting with their largest institutional clients on demand. But they serve a much more vital role in the ETF ecosystem, often acting as authorized participants, and helping buyers and sellers find each other in the most efficient way possible.
This year’s winner, Jane Street, has grown rapidly in the past few years, and now boasts more than 90 dedicated ETF traders, doing over $6.5 billion in business a day. Jane Street is also well-known for its commitment to charitable giving and diversity, regularly being heralded as one of the best places to work on Wall Street.
Commenters noted Jane Street’s commitment to helping not just the giant ETF issuers, but new entrants with small funds, where liquidity can be the difference between growth or closure, making them one of the best places to work with on Wall Street too.
ETF CUSTODIAN OF THE YEAR
WINNER: Brown Brothers Harriman
A good ETF custodian often wears many hats. It’s not enough to just hold securities for a fund; usually custodians perform dozens of other services as well, including net asset valuation calculation, dissemination, tax support, settlements and securities lending.
With more than $500 billion in ETF assets under custody, Brown Brothers Harriman (BBH) has proven itself a capable one-stop shop for the ETF industry. Over the past 15 years, the firm has partnered with some 39 asset managers and ETF sponsors around the globe, working with large, established players and small, innovative newcomers alike.
Known for rolling up its sleeves, BBH’s experts partner with prospective issuers throughout the life cycle of a fund, guiding ETFs from concept to launch and beyond. Most investors never see any of that hard work, not unless something goes wrong. With BBH, it rarely does.
BEST ONLINE BROKER FOR ETF-FOCUSED INVESTORS
WINNER: Charles Schwab
While an ETF issuer can put out great products, ultimately, individual investors, advisors and institutions all interact with ETFs through their brokerage platforms. The best—which this finalist list is—improve on investor outcomes through more than just great execution: They deliver core education, innovative products and alternative services that can make all the difference.
Charles Schwab takes this award for the fourth time, and it’s easy to see why: It covers all the bases. Its commission-free ETF pool now tops 500 products (22 of which are Schwab’s proprietary offerings).
Its automated investment platform now includes free offerings essentially for clients of any size, and a 0.28% “bionic” offering for larger clients that brings a certified financial planner into the mix. For more DIY types (and financial advisors), Schwab offers everything from model portfolios to comprehensive fund-by-fund research.
We’re not 100% sure what comes next for ETF investors—innovation’s hard to predict—but we’re 100% positive that whatever it is, Charles Schwab will be in the middle of it.
BEST ETF ISSUER WEBSITE
BlackRock’s iShares unit continues its winning streak when it comes to Best ETF Issuer Website, claiming the prize for 2018, as it has every year since the ETF.com Awards began. The site has recently undergone a bit of a facelift, and while it’s well-designed and easy to understand, the sheer volume of choices and information on the main page is vast.
At the very top, visitors can select from a fund search, investment ideas from iShares, research under the “Insights” option, educational pieces on investing and ETFs, or the extensive iShares resource library.
However, if investors stick to the main page and continue to scroll down, they can read an article about a highlighted topic or search for a specific fund by name, ticker or product type. There’s also a box to the right that will take you to a screenable list of all of the iShares products; a tool that allows you to compare up to four iShares ETFs; and overviews of key iShares ETF categories.
Scroll down further on the main page, and the Product Offerings section will direct you to the top funds in important product categories. Below that, the News & Events section offers analysis of the global economy. Visitors can continue downward to access iShares’ Education and Resource Library sections.
The site showcases the depth of the iShares lineup as well as the firm’s wide-ranging expertise and data.
BEST INDEX PROVIDER WEBSITE
MSCI has won the award for Index Provider Website before, which isn’t surprising. The site showcases not only the index provider’s extensive product offering, but the depth of its expertise, which is informed by its 50+ years of experience in the index business.
At every turn while navigating the website, visitors can access MSCI’s research through blogs and research papers, as well as learn more about its product offerings, which the firm has broken down into five core categories: global investing, factor investing, risk management, real estate and ESG research.
In addition to new blog posts and research covering those core areas, the website also allows visitors to search for returns for its cap-weighted regional, country and sector indexes based on any end date for up to a 10-year period. The sight further offers educational sections on ESG, factors and real estate investing, as well as core asset classes.
Essentially, the intuitive design of MSCI’s website offering and the amount of research and data it provides gives investors the means and opportunity to educate themselves on a wide range of investment topics and to fully understand how products tied to MSCI indexes work.
BEST ETF ISSUER CAPITAL MARKETS DESK
WINNER: iShares by BlackRock
If liquidity providers are the team on the field, an ETF issuer’s capital markets team is the coaching staff. While investors never trade directly with them, they have an enormous influence on every trade: working with authorized participants to make sure they can effectively arbitrage out price disconnects; helping institutions connect with counterparties; or just working with portfolio managers to help manage internal liquidity.
iShares by BlackRock takes the prize here for the second year in a row. Perhaps it’s no surprise that the world’s largest ETF issuer continues a 25-year tradition of capital markets excellence. Commenters highlighted how the firm works with advisors to help them understand the impact of large trades, to manage rebalancing trades across different issuers, and to offer expertise in how to manage portfolios reaching far beyond iShares ETFs.
ETF INVESTOR OF THE YEAR
WINNER: Newfound Research
Look, we get it. This is a weird category. But the ETF industry has evolved so fast, that one year’s “ETF strategist” is another’s “TAMP mentor.”
The bottom line is that in between the manufacturers (the issuers) and the consumers (all of us investors) there exists a layer of portfolio managers, advisors, institutions and influencers who provide insight to the rest of us. The nominees represent the diversity of that definition: advisors, robo advisors and investment managers, who all touch the public in some way.
Newfound Research, this year’s returning 2016 champion, continues a tradition of not only doing right by its clients, but anyone willing to tune their TV or click on a link. To name names, co-founder and CIO Corey Hoffstein has been featured everywhere, from the pages of Barron’s to the air of CNBC to the digital realm, with Corey’s (too infrequent!) “Flirting with Models” podcast.
In everything it does, Newfound is bringing a message of rational investing to every kind of investor.
ETF LAW FIRM OF THE YEAR
WINNER: Stradley Ronon
While issuer CEOs may get the TV coverage, the real innovations in ETFs often come from the attorneys who figure out new and inventive ways to package exposures. After all, the very first ETF was as much a product of legal wrangling as it was investment management.
This year’s finalists range from the enormous, with over 1,000 attorneys, to the more boutique. This year’s winner, Stradley Ronon, fits in the latter category (although with 200 attorneys, it’s hardly small).
Led by the highly visible and universally respected Michael Mundt, Stradley Ronon’s ETF work spans all of the major issues facing the ETF market today, from helping active managers enter the space to working with the innovators behind several proposed nontransparent structures.
It’s often in the middle of the industry’s biggest news stories—like client Invesco’s acquisition of Oppenheimer’s and Guggenheim’s ETF businesses. Commenters repeatedly highlighted the value of their Stradley Ronon relationship in getting them to market quickly and efficiently.
ETF TICKER OF THE YEAR
WINNER: ProShares Pet Care ETF (PAWZ)
While this is arguably one of our funnest categories, it may also be the most competitive, as this year’s crop of ETF ticker finalists reflects. With three animal-related tickers (PAWZ, GOAT, SWAN), a salute to military veteran (VETS), one of the first blockchain ETFs off of the (BLOK) and a socially responsible take on bond ETFs (GRBN), this was definitely a horse race.
But at the end of the stretch, PAWZ won hands-down for being such a new take on the investing world laser focused on our furry friends.
PAWZ is the first fund centered on companies related to pet ownership. To be selected, a stock must fit one of eight subindustries: pet food manufacturing, pet supplies manufacturing, pet and pet supply stores, veterinary pharmaceuticals, veterinary diagnostics, veterinary product distributors, veterinary services, and internet pet and supply retail.
The fund is tilted to U.S. companies, and pet health care is the biggest exposure by segment. Dechra Pharmaceuticals and IDEXX Labs are the top two holdings, comprising 20% of the fund.
In roughly four months, this thematic ETF has attracted $27 million in assets. With more than 65% of Americans owning pets and more than $60 billion spent on the space annually, PAWZ is not only a good ticker, but looks to have some ETF legs with an idea that is crystal clear and noncontroversial.
PEOPLE’S CHOICE AWARD
WINNER: VanEck Vectors Video Gaming and eSports ETF (ESPO)
Every year at the Inside ETFs conference, some of the best-known names in the ETF industry that are not affiliated with any issuer enter the ring for an epic showdown. Each participant selects an ETF launched during the previous year to champion, with the recipient of the loudest cheers at the end of the debate taking the “people’s choice” prize.
This year, the VanEck Vectors Video Gaming and eSports ETF (ESPO) bested a field of seven (which included one ETF series) to claim victory. And it’s not really a surprise—who could resist an ETF devoted to playing video games? Further, ESPO was championed by an industry stalwart, Bitwise Head of Global Research Matt Hougan, one of the driving forces behind the Inside ETFs conferences and former CEO of ETF.com, which no doubt leant some heft to his advocacy.
ESPO is a unique fund. Although there’s another ETF devoted to video game companies, ESPO has a twist. It targets the world of competitive video gaming: esports. So not only does it include companies that provide video game hardware and software, it holds companies involved in esport events such as those that operate leagues.
Interestingly, ESPO doesn’t include some giants in the esports space, like Microsoft and Amazon, because video games and esports don’t represent a large enough portion of their revenue. The fund aims to be a pure play, and only includes companies that derive at least half of their revenue from business activities related video games and esports.
ETF.com Award winners are selected in a three-part process designed to leverage the insights and opinions of leaders throughout the ETF industry.
The awards process began with open nominations, which started Dec. 3, 2018, and closed Jan. 3, 2019.
Following the open nominations process, the ETF.com Awards Nominating committee—made up of senior leaders at ETF.com, Inside ETFs and the FactSet ETF team (whose data powers the ETF. com website and fund reports)—voted to select up to five finalists in each category. Votes were cast on a majority basis, and ties broken where possible with head-to-head runoff votes. If ties could not be broken, more than five finalists were allowed. The nomination voting concluded Jan. 14, 2019.
2018 Nominating Committee
- Matt Hougan, Chairman, Inside ETFs (Chair)
- Paul Britt, Senior Analyst, FactSet
- Elisabeth Kashner, Director of ETF Research, FactSet
- Dave Nadig, Managing Director, ETF.com
- Drew Voros, Editor-in-Chief, ETF.com
Winners among these finalists were selected by a majority vote of the ETF.com Awards Selection committee, a group of independent ETF experts from throughout the ETF community. Committee members recused themselves from voting in any category in which they or their firms appeared as finalists. Ties were decided where possible with head-to-head runoff votes.
2018 Awards Selection Committee
- Kim Arthur, Main Management
- Eric Balchunas, Bloomberg Intelligence
- Ben Blaisdell, US Trust
- Rob Glownia, RiverFront
- Tom Lydon, ETFtrends.com
- Phil Mackintosh, NASDAQ
- Tyler Mordy, Forstrong Global Asset Management
- Todd Rosenbluth, CFRA
- Jim Wiandt, Industry Expert
Voting was completed in January, but results will be kept secret until they are announced at the ETF.com Awards Dinner on March 28, 2019.
2018 Award Winners
|LIFETIME ACHIEVEMENT AWARD||ETF ISSUER OF THE YEAR|
|Deborah Fuhr, Managing Partner and Founder, ETFGI||J.P. Morgan Asset Management|
|ETF OF THE YEAR||MOST INNOVATIVE ETF ISSUER OF THE YEAR|
|JPMorgan BetaBuilders Japan ETF (BBJP)||Impact Shares|
|BEST NEW ETF||NEW ETF ISSUER OF THE YEAR|
|JPMorgan BetaBuilders Japan ETF (BBJP)||Defiance ETFs|
|MOST INNOVATIVE NEW ETF (TIE)||INDEX PROVIDER OF THE YEAR|
|Breakwave Dry Bulk Shipping ETF (BDRY)||MSCI|
|Innovator S&P 500 Buffer ETFs (Series) (BJUL)||INDEX OF THE YEAR|
|BEST NEW U.S. EQUITY ETF||WisdomTree U.S. Multifactor Index|
|Vanguard ESG U.S. Stock ETF (ESGV)||ETF LIQUIDITY PROVIDER OF THE YEAR|
|BEST NEW INT’L/GLOBAL EQUITY ETF||Jane Street|
|JPMorgan BetaBuilders Japan ETF (BBJP)||ETF CUSTODIAN OF THE YEAR|
|BEST NEW U.S. FIXED-INCOME ETF||Brown Brothers Harriman|
|iShares ESG U.S. Aggregate Bond ETF (EAGG)||BEST ONLINE BROKER FOR ETF-FOCUSED INVESTORS|
|BEST NEW INTERNATIONAL/GLOBAL FIXED-INCOME ETF||Charles Schwab|
|Vanguard Total World Bond ETF (BNDW)||BEST ETF ISSUER WEBSITE|
|BEST NEW COMMODITY ETF||iShares by BlackRock|
|iShares Bloomberg Roll Select Commodity Strategy ETF (CMDY)||BEST INDEX PROVIDER WEBSITE|
|BEST NEW ALTERNATIVES ETF||MSCI|
|VanEck Vectors Real Asset Allocation ETF (RAAX)||BEST ETF ISSUER CAPITAL MARKETS DESK|
|BEST NEW ASSET ALLOCATION ETF||iShares by BlackRock|
|WisdomTree 90/60 U.S. Balanced Fund (NTSX)||ETF INVESTOR OF THE YEAR|
|BEST NEW SMART-BETA OR FACTOR ETF||Newfound Research|
|iShares Evolved U.S. Sector ETFs (Series) (IECS)||ETF LAW FIRM OF THE YEAR|
|BEST NEW ACTIVE ETF||Stradley Ronon|
|Vanguard U.S. Multifactor ETF (VFMF)||ETF TICKER OF THE YEAR|
|BEST NEW ESG ETF||ProShares Pet Care ETF (PAWZ)|
|Goldman Sachs JUST U.S. Large Cap Equity ETF (JUST)||PEOPLE’S CHOICE|
|THEMATIC ETF OF THE YEAR (TIE)||VanEck Vectors Video Gaming and eSports ETF (ESPO)|
|VanEck Vectors Video Gaming and eSports ETF (ESPO)|
|EventShares U.S. Policy Alpha ET (PLCY)|