ETF Growth Sparkles In July

August 08, 2019

The ETF Think Tank is a community of advisors focused on a client-centric approach to investing through the use of ETFs. Each week, we disseminate research on the growth of the ETF industry including key performance indicators (KPIs) on number of ETFs listed, assets, revenue, exchange market share and number of issuers. This data is useful in serving to monitor the trends in the ETF. Here’s a look at July’s metrics.

 

 

New Listings Grow Faster Than Closings

There are currently 2,288 ETFs listed in the U.S. Over the last 12 months, we have seen 257 new ETFs launch compared with 177 ETFs that closed, for a 1.45 open-to-close ratio.

However, the ratio is showing improvement. The ratio improving to 1.70 for the first seven months of 2019, or 1.70 new ETFs for each closed ETF. This KPI shows an increasing appetite for issuers to continue to launch new and creative ETF ideas.

 

 

Assets Grow While Influence Diversifies

As of Aug. 1, 2019, U.S. ETF assets reached $4.028 trillion—a sequential record high—and annual growth at 19.14%. Another KPI of significance is the “ownership influence score.”

Our average ETF ownership influence has dropped this year, from 8.25% at the beginning of 2019 to 6.90%, due to a more diversified offering and a concentration of ETF flows toward large-cap U.S. equities. The ownership influence score is the average amount of the market cap of every U.S. stock owned by ETFs.

We often speak about intended and unintended consequences of ETF growth. In this report, we decided to focus on ownership influence of the stocks in the Dow Jones Industrial Index, which range as low as 3.5% for Walmart (WMT) and as high as 9% for Travelers (TRV).

We argue that ETF ownership influence at 6.9% on average is not an impactful percentage of most stocks, but it is worth noting that this percentage on average is down from 8.25% at the beginning of the year.

Walmart’s Unique Situation

Walmart is a unique situation because the Walton family continues to own 49.6% of the company. Noteworthy is the fact that Walmart’s return has outperformed the SPDR S&P 500 ETF Trust (SPY) over these past five years at 11.25% vs 11.21%, respectively.

Similar outperformance has been earned the past 26 years period with a compound return of 10.34% vs 9.57%, respectively (Bloomberg, performance chart from July 31, 1993 through July 31, 2019). Of course, we all know what has happened with Amazon, 5% of which is owned by ETFs.

 

[Use ETF.com’s stock finder tool to find an ETF’s allocation to a certain stock.]

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