Key ETF Indicators Tinged With Gold

October 14, 2019

New Launches Accelerate

As ETF Nerds, we were pleased to see 34 new ETFs to analyze in September and that the open/close ratio rebounded to 1.61 from 1.45. This meant that the number of ETFs now is at 2,294, up from 2,278 in August.

Leading the charge of new listings was Franklin Liberty, with the active Franklin Liberty U.S. Core Bond ETF (FLCB), which has an impressive $861 million since launching on Sept. 17. The haul in assets is a result of what is commonly referred to as “bring your own assets” (BYOA), a trend we have been seeing more of from large wealth management firms entering the ETF space.

Over the past 12 months, the number of ETFs is up 8.4%, there are 239 new launches and 148 closures.

Assets Rebound To New Record

As of Sept. 30, 2019, assets in ETFs rebounded to $4,047 trillion, a second record month-end close, a nearly 2% increase from August’s $3,968 trillion.

Another KPI of significance is our metric that measures revenues from expense ratios, which showed a slight increase to $7.59 billion, but less than the $7.68 billion back in July. Nontraditional and active ETFs closed the month with market shares of 38.88% and 5.7%, respectively. The average weighted expense ratio remains at 0.19% despite all the talk of fee wars.  

Revenue Grows, Fees Fall

The average weighted expense ratio for U.S. ETFs remains the same, at 0.19% from July 31. Fee compression may be a slow continuum, but with increased assets, the projected 12-month revenue increased from $6.83 billion in January to $7.59 billion today.

The percentage of ETF revenue from nontraditional passive ETFs in January was 36.38%; today it’s 38.88%. Active ETF revenue also gained market share, growing from 5.11% to 5.70%. These KPIs help show that investors are still looking for interesting and creative strategies to help diversify their portfolio.

 

 

Exchange Market Share Steady

There has been very little material movement in ETF exchange market share of listings, with NYSE remaining in the dominant position, at 69.27%. Cboe Global Markets, parent company of ETF.com, has 14.08%; Nasdaq remains at 16.17%.

Don’t Buy An ETF, But Have An ETF Strategy For Your Business

In this report, we focus on the allocations strategy as a subcategory of ETFs, because this category ultimately could contribute to significant growth in the ETF industry. For instance, hedge fund investors could benefit by the tax efficiency of the wrapper.

Currently, it is barely one-third of 1% of the overall $4,047 trillion in AUM. If growth in AUM is going to expand in trillion-dollar increments, it will not be just from flows to broad, low-cost beta, but because of tax efficiency and access to investment solutions in a changing environment.

 

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Contact Dan Weiskopf at [email protected]

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