ETF Leader Board Shaken Up

November 12, 2018

After ETFs gathered more than $450 billion of new money in 2017, aided by a strong U.S. equity market, flows moderated in 2018. This year, we’re likely to see the strong $200 billion-plus annual inflow levels achieved between 2014 and 2016, but year-to-year comparisons may be challenging.

Behind weaker flows this year is the fact that the more than 20% gain for the S&P 500 in 2017 has been replaced by more modest market gains, and increased market volatility.

On the surface, this may seem like bad news for issuers. However, in this environment, more moderately sized ETF firms have climbed the industry leader board, aided primarily by interest in their bond offerings.

Bond ETFs Rule This Year

iShares and Vanguard remain the top-two industry heavyweights, and gathered 73% of net inflows in the first 10 months of 2018, according to data on ETF.com. That’s above their 64% market share.

Demand has remained strong for their low-cost, diversified equity products, such as the iShares Core MSCI EAFE ETF (IEFA), the iShares Core S&P 500 (IVV), the Vanguard 500 Index ETF (VOO) and the Vanguard Total Stock Market Index ETF (VTI). Moreover, both firms also benefited this year from investor demand for the safety of short-term Treasuries.

For example, the iShares 1-3 Year Treasury Bond ETF (SHY) and the Vanguard Short-Term Treasury Index ETF (VGSH) respectively pulled in $3.5 billion and $1.7 billion of new money thus far in 2018, up sharply from $456 million and $948 million, respectively, for all of 2017.

ETF Leader Board Anything But Fixed

iShares and Vanguard remained on top this year, but the next two players—State Street (17% market share) and Invesco (5%)—have lost ground in 2018 to Charles Schwab (No. 5 player), First Trust (No. 6) and J.P. Morgan (No. 11).

State Street’s $8 billion of net outflows this year were led by weakness in the SPDR S&P 500 ETF Trust (SPY) and the SPDR Gold Trust (GLD). Redemptions outweighed interest in the SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL).

Meanwhile, Invesco’s net inflows to the Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF (PDBC) were limited by redemptions from the Invesco Senior Loan ETF (BKLN) and the Invesco Emerging Markets Sovereign Debt ETF (PCY)—ETFs that incur greater credit risk than many investors have wanted to bear this year.

 

October 2018 League Table

Issuer Net Flows ($,M) AUM ($,M) % of AUM YTD 2018 Net Flows($,M)
BlackRock 1,917.42 1,344,689.08 0.14% 72,678.65
Vanguard 3,030.92 876,216.06 0.35% 63,633.91
State Street Global Advisors -6,659.53 600,207.73 -1.11% -7,533.84
Invesco -2,232.50 182,285.60 -1.22% 6,070.04
Charles Schwab 1,600.73 117,479.77 1.36% 23,744.99
First Trust -1,625.59 65,496.12 -2.48% 10,736.38
WisdomTree -118.77 38,197.31 -0.31% -4,381.64
VanEck 247.05 33,800.38 0.73% 3,780.71
ProShares 1,142.66 29,910.45 3.82% 3,562.07
PIMCO 296.21 17,589.23 1.68% 3,070.51
JPMorgan 2,275.52 16,181.34 14.06% 10,895.44
Northern Trust 98.22 15,462.35 0.64% 462.21
ALPS -3.49 12,958.87 -0.03% -346.81
Rafferty Asset Management 1,300.04 12,004.98 10.83% 1,896.89
Fidelity 316.38 11,901.17 2.66% 3,178.81
Deutsche Bank 165.95 11,857.93 1.40% -609.12
Goldman Sachs 751.09 9,842.86 7.63% 3,875.47
Mirae Asset Global Investments -189.57 9,043.15 -2.10% 1,961.12
UBS 66.11 6,545.95 1.01% 57.93
Barclays Bank PLC -445.05 5,421.76 -8.21% 1,800.82
Exchange Traded Concepts -262.12 4,527.84 -5.79% 187.32
Credit Suisse 56.12 4,415.31 1.27% 632.45
New York Life 136.19 4,028.54 3.38% 698.35
OppenheimerFunds 558.97 3,533.39 15.82% 1,119.95
The Principal Financial Group 196.60 3,377.10 5.82% 1,269.99
Victory Capital Management 98.22 3,145.83 3.12% 1,032.69
ETF Managers Group 65.90 3,143.23 2.10% 1,478.29
Pacer Financial 213.97 2,972.98 7.20% 1,479.43
US Commodity Funds 40.72 2,771.09 1.47% -1,088.14
Aberdeen Asset Management 13.89 2,250.72 0.62% -203.09
ARK -107.12 2,199.14 -4.87% 1,390.06
John Hancock 835.98 2,159.49 38.71% 1,155.46
KraneShares 166.24 1,809.69 9.19% 962.82
Hartford 395.24 1,705.52 23.17% 1,478.36
Franklin Templeton Investments 60.29 1,567.69 3.85% 661.01
Northern Lights 51.76 1,167.80 4.43% 435.39
USAA Asset Management 27.63 1,101.17 2.51% 853.64
Janus Henderson 95.73 868.77 11.02% 593.75
Millington Securities Inc -7.54 860.24 -0.88% -85.18
Virtus -12.88 843.72 -1.53% 19.31
Legg Mason 6.22 800.11 0.78% 130.25
AdvisorShares 8.17 762.61 1.07% -66.80
Transamerica 0.00 756.15 0.00% -61.15
Columbia -63.39 713.82 -8.88% -382.46
CitiGroup 6.41 706.08 0.91% 109.80
Innovator Capital Management -21.79 694.10 -3.14% 251.87
Cambria -21.20 646.57 -3.28% 6.99
OSI ETF Trust -12.38 613.04 -2.02% -74.52
Davis 19.42 551.48 3.52% 261.44
Highland Capital Management -71.28 548.88 -12.99% -11.01
Amplify -94.56 542.01 -17.45% 413.75
Nuveen -52.33 534.44 -9.79% 147.02
Alpha Architect -12.87 431.30 -2.98% 162.10
GraniteShares 6.65 359.97 1.85% 343.14
Nationwide Fund Advisors -0.67 346.71 -0.19% 2.19
BMO 0.00 323.07 0.00% 76.84
Strategy Shares 5.92 303.41 1.95% 247.47
Reality Shares -14.28 221.44 -6.45% 141.51
Aptus Capital Advisors 18.59 212.25 8.76% 160.32
Arrow Investment Advisors -5.01 167.52 -2.99% 7.44
Montage Managers 2.26 159.67 1.42% 49.04
The RBB Fund 7.51 141.09 5.32% 138.99
PGIM Investments 39.72 139.11 28.56% 79.78
TrimTabs Asset Management 1.89 137.80 1.37% 95.40
Merk 0.09 134.96 0.06% 6.75
ClearShares 0.00 131.52 0.00% 23.65
US Global Investors 0.00 101.31 0.00% -0.84
EntrepreneurShares, LLC -0.85 69.31 -1.22% 15.44
Exponential ETFs 2.29 67.90 3.37% 15.66
American Century 0.00 60.99 0.00% 35.21
Redwood Investment Management 50.87 50.29 101.17% 50.87
OBP Capital LLC -2.54 49.79 -5.11% 1.25
Natixis 2.47 47.98 5.15% 11.84
Point Bridge Capital -1.32 34.36 -3.84% 3.06
Premise Capital 0.00 33.26 0.00% 15.10
FQF Trust 7.29 30.80 23.68% 3.18
Validea Capital Management 0.00 24.39 0.00% 0.03
AlphaMark Advisors 0.00 23.84 0.00% -1.35
Morgan Stanley 0.00 22.67 0.00% -8.50
Diamond Hill 0.00 22.10 0.00% 3.26
Advisors Asset Management 5.21 21.49 24.25% 17.31
Cboe Vest Financial 5.03 19.14 26.28% 19.45
Metaurus Advisors -0.00 18.35 -0.00% 13.45
Active Weighting Advisors 1.69 17.66 9.55% 3.46
Renaissance Capital -1.25 17.35 -7.23% -1.21
Sage Advisory Services 0.00 14.46 0.00% 4.84
USCF Advisers 0.00 11.13 0.00% 0.14
CSOP 0.00 9.61 0.00% 3.49
SL Advisors 0.00 9.24 0.00% 6.50
StrongVest 0.00 8.56 0.00% 0.00
Distillate Capital Partners 7.41 7.37 100.58% 7.41
Salt Financial 5.26 7.31 72.00% 7.75
Little Harbor Advisors 0.60 6.54 9.14% 6.90
Impact Shares 0.00 5.76 0.01% 6.10
Regents Park Funds -1.10 5.55 -19.84% 3.82
TriLine Index Solutions -1.34 4.63 -28.99% 4.91
Defiance ETFs 0.00 4.26 0.00% 5.00
SerenityShares 0.00 4.17 0.00% 0.00
Change Finance 0.00 3.76 0.00% 0.96
EquBot 0.00 3.45 0.00% 3.74
Whitford Asset Management 0.00 0.57 0.00% -1.91
Swedish Export Credit 0.00 0.00 0.00% 0.00

 

Schwab & First Trust Climbing The Ranks

At Schwab, the $24 billion of net inflows thus far in 2018 have positioned the industry’s No. 5 provider to match or exceed its $28 billion of new money a year ago. Yet the share of net inflows is more than double that of its total asset base. As at iShares and Vanguard, bond ETFs have been a major driver of creations.

The Schwab U.S. TIPS ETF (SCHP) and the Schwab Intermediate-Term U.S. Treasury ETF (SCHR) pulled in $5 billion combined year-to-date, more than triple what they gathered in all of 2017. Schwab has also continued to see interest in its low-cost equity products, including the Schwab International Equity ETF (SCHF).

Meanwhile, First Trust’s $11 billion of net inflows was more than double what the asset manager’s 2% market share would suggest.

Demand for short-term bond ETFs again played a role here, with the actively managed First Trust Enhanced Short Maturity ETF (FTSM) doubling the inflows from last year to $1.6 billion. Flows into the sector-oriented First Trust Dow Jones Internet Index Fund (FDN) and the First Trust NYSE Arca Biotechnology Index Fund (FBT) also exceeded $1.5 billion, easily surpassing the prior year’s demand.

JP Morgan The Year’s Star

Though Schwab and First Trust have gained in prominence in 2018, J.P. Morgan has crashed the ETF party, leveraging its scale as one of the largest active asset managers.

J.P. Morgan launched its first ETF in 2014, but this year the firm emerged as a key player. Nearly $11 billion of its $16 billion in total ETF assets came in the door in 2018, with the inflows heavily concentrated in one actively managed short-term bond ETF and two low-cost international equity ETFs.

The JPMorgan Ultra-Short Income ETF (JPST), which just launched in May 2017, gathered $3.2 billion of new money in the first 10 months of 2018. Not far behind JPST in asset gathering this year has been low-cost single-country ETFs. The JPMorgan BetaBuilders Japan ETF (BBJP) and the JPMorgan BetaBuilders Canada ETF (BBCA) added $2.4 billion and $2.1 billion, respectively, this year. Both launched in mid-2018 and carry a modest 0.19% expense ratio.

While the ETF pie continues to swell in 2018 and is likely to continue growing, more moderately sized ETF players have grabbed additional slices, aided by their lower-risk fixed-income offerings and lower-cost international equity offerings.

At the time of writing, neither the author nor his firm held any of the securities mentioned. Todd Rosenbluth is director of ETF and mutual fund research at CFRA, an independent research firm that acquired S&P Global Market Intelligence's equity and fund business in October 2016. He can be reached at [email protected]. Follow him on Twitter @ToddCFRA.

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