These ETF Issuer/Index Provider Tie-Ups Saw Big Demand

January 17, 2017

While Charles Schwab, PowerShares and Guggenheim had strong ETF inflows in 2016, others were bigger beneficiaries of the increased usage.

Specifically, the three largest providers—BlackRock’s iShares, Vanguard and State Street Global Advisors—pulled in 88% of the ETF inflows, according to FactSet data, benefiting from a variety of relationships with index providers. However, some were more meaningful than others.

While the S&P 500 Index is licensed to many different ETF providers, the more typical scenario has an ETF provider licensing a distinct benchmark from an index provider that results in a product’s unique holdings and performance. In many—but not all—cases, the ETF lists the index in its name, providing transparency and marketing benefits.

According to First Bridge Data, ETFs offered by State Street that seek to replicate an S&P Dow Jones index pulled in $40 billion in 2016. Demand accelerated in December, with $14 billion alone in these ETFs.

Sector Flows

While the SPDR S&P 500 ETF Trust (SPY) was by the far the strongest asset gatherer, certain sector-focused offerings such the Financial Select Sector SPDR Fund (XLF) were additional drivers for 2016. However, not all sector products were in favor, as the Consumer Staples Select Sector SPDR Fund (XLP) experienced moderate outflows.

S&P Global owns S&P Dow Jones Indices, but sold its Equity and Fund Research business to CFRA in October 2016.

ETFs tied to S&P Dow Jones also helped BlackRock’s iShares to gather $36 billion in assets, with $2.1 billion in December. The iShares Core S&P Small Cap ETF (IJR), part of the firm’s lower-cost Core Series, was highly popular last year. Meanwhile, iShares sector products tied to an S&P Dow Jones index, such as the iShares US Financials ETF (IYF), received limited interest.

Source: First Bridge Data

 

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