The $1 Billion ETF Club Is Getting Interesting

June 03, 2010

Last month’s ETF numbers marked a little changing of the guard in the ETF Inside-Baseball League.


Earlier this week, we reported the big winners and losers in May, and while the core shift in ETF investor psychology we documented is interesting, I can’t help but be fascinated by the shifting sands of the industry’s league table.

First, to sum up: Total assets in U.S. ETFs closed out May at $798 billion, down from nearly $850 billion when we reported the April numbers. The overall decline isn’t a surprise, given that the S&P 500 fell almost 8 percent in May, and foreign assets, marked by the MSCI EAFE Index, declined more than 11 percent. What’s somewhat surprising is that even in the midst of the bloodbath, ETF net inflows were a healthy $6.3 billion, even if that’s less than half of April’s $12.7.

Part of the reason for the positive numbers is that ETFs are increasingly being seen not just as speculative vehicles, but as parking places for safe-haven money, as witnessed by the top-10 asset-gathering performance of short-term Treasury bills, gold and Pimco’s Enhanced Short Maturity Strategy ETF (NYSEArca: MINT).

MINT is where the story gets interesting, because it’s a product I was openly skeptical about. After all, MINT’s about as close to a traditional money market fund as you can get right now in the ETF world. It’s got a 30-day SEC yield of 54 basis points, and a 35 basis point management fee. What’s more, you have to pay a commission to get in and out of it. When it launched, I was on record as saying I didn’t get it.

Boy was I wrong. With almost $800 million in assets, there’s clearly a market for a traded cash-equivalent vehicle, even if the yield on your margin account balance might be almost as good. And the rise of MINT puts Pimco into the $1 billion club in ETFs—a magical stratosphere where ETF companies start actually making money. Here’s the league table for May:

May 2010 League Table
The $1 Billion Club ($, mm)
Issuer May Flows 
AUM at 5/31/2010
BlackRock (1,282) 368,242
SSgA 6,026 195,014
Vanguard 2,486 103,064
Invesco PowerShares (3,236) 43,808
ProShares 1,691 26,106
Van Eck 564 14,536
WisdomTree (66) 6,574
Barclays Capital (1,579) 6,404
Rydex (288) 5,956
Direxion 907 5,570
US Commodities Funds 530 5,259
Merrill Lynch (18) 4,388
Claymore (75) 2,608
First Trust (184) 2,474
Pimco 622 1,553
ETF Securities 133 1,552
JPMorgan Chase - 1,174
Charles Schwab 60 1,149
Industry: 6,322 798,430
April Industry: 12,775 847,407

What’s notable to me is that the up-and-comer—such as Schwab, Pimco, US Commodity Funds, Direxion and Van Eck—all continue to pile on assets, while the five biggest players trade assets back and forth between huge trading vehicles like the SPDR S&P 500 (NYSEArca: SPY) and the PowerShares QQQ (NYSEArca: QQQQ).

What these rising stars all have in common is innovation in a market so many think is stagnant.

Direxion came out with “me too” leveraged products, but accurately believed there was room for an even more highly leveraged product than was previously available. Van Eck continues to roll out innovative commodities-equity strategies, seemingly just as the market wants them. Pimco proved me wrong. ETF Securities and US Commodities funds prove again and again that there’s a market for different slices and dices of the commodities space, whether it’s clever tax management strategies like the recently filed ETF Securities collateralized products, or the USCF Brent Crude ETF (NYSEArca: BNO).

I think the message to the big boys in all this is clear: Stay on your toes. Just because there aren’t any obvious ideas left doesn’t mean someone else can’t poach your investors with a better mousetrap. After all, those mousetraps are just a mouse-click away.

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