Who’s Behind Your ETF Index?

The index provider industry for ETFs is highly concentrated.

Reviewed by: Todd Rosenbluth
Edited by: Todd Rosenbluth

Key Takeaways

  • The five largest index providers for equity ETFs were behind 92% of the mid-2020 industry assets, but the largest asset managers work in different ways with these firms.
  • ETFs tied to S&P Dow Jones Indices (SPDJI) benchmarks represented 40% of iShares’ equity assets at the end of the second quarter of 2020, while 40% of Vanguard’s equity ETFs tracked CRSP indexes offered by the University of Chicago. Yet many funds from these firms tied to MSCI and FTSE Russell indexes were also popular.
  • In contrast, 98% of State Street Global Advisors’ equity ETF assets were connected to an SPDJI index, while 64% of Invesco’s stems from funds tracking Nasdaq benchmarks.

The top three equity index providers remain dominant in the U.S. ETF industry, despite new supply of actively managed equity ETFs and efforts by smaller firms.

Benchmarks from S&P Dow Jones Indices (SPDJI), part of S&P Global (SPGI); MSCI (MSCI); and FTSE Russell were being tracked by U.S. and global equity ETFs with $2.4 trillion in assets. This is equal to 75% of the $3.3 trillion at the end of the second quarter, according to CFRA’s First Bridge ETF database.

Market Share Metrics

SPDJI remained the largest, with 41% market share, and its flagship U.S. large-cap S&P 500 Index was used by the three largest ETFs: the SPDR S&P 500 ETF Trust (SPY), the iShares Core S&P 500 ETF (IVV) and the Vanguard S&P 500 ETF (VOO).

Meanwhile, MSCI (17% share) and FTSE Russell (16%) are battling it out for the second largest slice of the equity ETF market and have a large presence backing index-based international equity strategies.

The Vanguard FTSE Developed Markets ETF (VEA) and the iShares Core MSCI EAFE ETF (IEFA) were the most widely held of these funds, with $70 billion and $64 billion, respectively, in assets at the end of June 2020. However, the top three index firms also work with the largest ETF providers on factors, industry/sector strategies, small caps  and more.

Rounding out the top five index providers (representing a combined 92% of equity ETF assets), were CRSP (11%), an affiliate of the University of Chicago Booth School of Business, and Nasdaq (6.5%).

While some more moderately sized ETF managers, such as WisdomTree and Goldman Sachs, have opted to use in-house benchmarks that allow customization and leverage internal resources rather than licensing an index from a third-party firm, there is high concentration behind the scenes of ETFs.


Chart 1: Industrywide Equity ETF Index Partners Market Share (%)

Industrywide Equity ETF Index Partners Market Share (%)

Source: CFRA’s First Bridge ETF Database. As of June 30, 2020.


iShares Teams With SPDJI & MSCI

Owned by BlackRock (BLK), iShares is the largest manager of equity ETFs, with 35% share of the asset category according to CFRA’s First Bridge ETF database. SPDJI represented 40% of iShares’ equity ETF asset base at the end of the second quarter. In addition to IVV and IJR, the iShares Core S&P Mid-Cap ETF (IJH), and the iShares S&P 500 Value (IVE) are widely held funds tracking market-cap-weighted S&P benchmarks.


Chart 2: iShares’ Equity ETF Index Partners Market Share (%)

iShares’ Equity ETF Index Partners Market Share (%)

Source: CFRA’s First Bridge ETF Database. As of June 30, 2020.


MSCI’s International & Factor Focus

Meanwhile, MSCI-based equity ETFs are primarily concentrated in international funds—IEFA and the iShares Core MSCI Emerging Markets ETF (IEMG)—and factor strategies. Factor ETFs are constructed based on fundamental or price-based metrics, including valuation and minimum volatility, as opposed to the size of the company based on market capitalization.

USMV and the iShares Edge MSCI U.S.A. Value Factor ETF (VLUE) are two such examples that rely on analytical screens run by MSCI. VLUE is a sector-neutral ETF holding stocks with value characteristics and relatively low valuations.

While VLUE holds some overlapping securities with IVE, the weightings are significantly different. VLUE held a 9.3% stake in Intel (INTC) and an 8.3% stake in AT&T (T), much higher than IVE’s 2.0% and 1.0%, respectively. Meanwhile, information technology represented 26% of VLUE assets, triple the 8.5% stake for IVE.

(Use our stock finder tool to find an ETF’s allocation to a certain stock.)

In the three-year period ended July 17, VLUE rose 2.6%, underperforming IVE’s 4.6%—highlighting that ETFs that sound the same, even from the same asset manager, will not look or act the same due to the index provider’s approach.

Vanguards’ Index Tilts

Though Vanguard works with SPDJI and MSCI, CRSP and FTSE Russell indexes are behind two-thirds of its equity assets.

Vanguard was the second largest equity ETF provider, with 29% share, with SPDJI-based VOO as the firm’s largest equity ETF at the end of June 2020, with $148 billion in assets.

However, 40% of its equity ETF business was in funds tracking a CRSP benchmark. The Vanguard Total Stock Market ETF (VTI) was close behind VOO, with $143 billion in assets, and the University of Chicago affiliate also runs the indexes behind the popular small cap fund VB and the Vanguard Growth ETF (VUG). With CRSP-based products, Vanguard leaves the less-well-known index provider’s name off the fund label.

Though both focus on small cap universe, VB’s median market capitalization of $4.4 billion was much higher than iShares’ IJR’s $954 million at the end of the second quarter. Here, too, a look inside is more important than VB’s slightly lower 0.05% expense ratio (0.06% for IJR). VB’s 4.5% three-year annualized record as of July 17 was much stronger than IJR’s 0.9%.  


Chart 3: Vanguard’s Equity ETF Index Partners Market Share (%)

iShares’ Equity ETF Index Partners Market Share (%)

Source: CFRA’s First Bridge ETF Database. As of June 30, 2020.


State Street Moored To SPDJI

Unlike larger peers, State Street Global Advisors is tied at the hip with S&P Dow Jones.

SPY is the largest of these SPDJI-based ETFs, but State Street’s sizable industry and sector lineup is also driven by the index provider.

The Consumer Discretionary Select Sector SPDR (XLY) and the SPDR S&P Homebuilders (XHB) are examples of these funds. XHB provides exposure to not only homebuilding companies, but home improvement and home furnishing retailers that are part of the consumer discretionary sector.

The firm also offers the SPDR Dow Jones Industrial Average ETF Trust (DIA), which, with $22 billion in assets, is one of the State Street’s largest offerings. Overall, 98% of State Street Global Advisors equity ETFs are tied to a SPDJI benchmark.


Chart 4: State Street Global Advisors Equity ETF Index Partners Market Share (%)

State Street Global Advisors Equity ETF Index Partners Market Share (%)

Source: CFRA’s First Bridge ETF Database. As of June 30, 2020.


Invesco Beyond Nasdaq

Invesco’s asset base is dominated by one Nasdaq ETF, but is more connected to SPDJI than appears.

The Invesco QQQ Trust (QQQ), which tracks the Nasdaq-100 Index, ended June 2020 with $115 billion in assets. QQQ and some industry ETFs have helped drive Nasdaq to represent 64% of Invesco equity ETF business.

However, four of its five next largest equity funds track an SPDJI benchmark. These four are SPLV, the Invesco S&P 500 Equal Weight ETF (RSP), the Invesco S&P 500 High Dividend Low Volatility ETF (SPHD) and the Invesco S&P 500 Pure Growth (RPG), with the Invesco FTSE RAFI U.S. 1000 ETF (PRF) the fifth fund. SPDJI-linked and FTSE Russell-linked ETFs represented 24% and 5.4% of Invesco’s equity ETF business, respectively.  

SPLV and iShares’ USMV both seek to hold lower-risk U.S. stocks, but the investment approaches and the final portfolios are distinct based on how SDJI and MSCI run the underlying benchmarks.

For example, SPLV has no sector constraints, and recently had 23% in consumer staples, nearly double the 12% weighting for USMV. SPLV has underperformed USMV in the last three years by approximately 300 basis points, though SPLV outperformed in the past month.


Chart 5: Invesco’s Equity ETF Index Partners Market Share (%)

Invesco’s Equity ETF Index Partners Market Share (%)

Source: CFRA’s First Bridge ETF Database. As of June 30, 2020.


CFRA’s ETF ratings offer a forward-looking view based on holdings, costs and performance analytics. While some investors rely solely on past performance or expense ratio to judge an ETF, we think proper due diligence includes a review of what is inside from a forward-looking risk and reward perspective. Therefore, we have some high ratings on some equity ETFs that have lagged.


The top four U.S. ETF managers have unique partnerships with leading index firms, with some deriving assets from just one, while others use a more diversified approach. With passively managed equity ETFs, the benchmark provider—and their approach to index construction—drives security selection and future performance.

Even as fees on index-based ETFs continue to creep lower, index firms play a significant, yet overlooked, role in the ETF ecosystem.

All of the views expressed in this research report accurately reflect the research analyst's personal views regarding any and all of the subject securities or issuers. No part of the analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report. For more information and disclosures, please refer to CFRA's Legal Notice at https://www.cfraresearch.com/legal/.

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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. Follow him at @ToddCFRA.