Assets in U.S.-listed ETFs have grown about 26% in the past year. At about $2.75 trillion in total ETF assets today, the industry continues to see a relatively consistent pace of asset growth—and one that is outpacing most other financial market segments.
That’s not news. But there are a few interesting points behind that number. First, the obvious: Roughly 82% of all U.S.-listed ETF assets is managed by three single ETF issuers—BlackRock’s iShares, Vanguard and State Street Global Advisors.
One year ago, these three firms also commanded about 82% of the market. Their dominance is clear, consistent and, apparently, unwavering.
Consider that, individually speaking, each of these three issuers saw their asset base grow at a slightly faster pace than the overall market in the past 12 months. Both iShares and SSgA each saw an asset jump of 28% in the past 12 months, and Vanguard’s assets rose by 36% in the same period. They are big, but they are still getting bigger fast.
Smaller Issuers See Big Growth
The really mind-boggling data is growth among smaller ETF issuers on a relative basis.
Growing from a much smaller base is certainly easier to do, so it’s unsurprising that some of the asset growth numbers among smaller issuers are truly impressive. But the significance of these relative growth numbers is that, for all the talk about a crowded ETF market, and about the difficulty of competing with the giants in the space, there still seems to be ample room for the little guy.
We have 78 ETF issuers in the market today, 75 of which command about $576 billion in U.S.-listed ETF assets. (The big three manage the other $2.218 trillion.) Some of these issuers are seeing their asset base double, triple—growth of tenfold in a matter of months.
Out of 78 issuers, 18 firms saw their assets under management (AUM) rise at least 100% in the past 12 months. The table below lists these firms, ranked by AUM growth:
|ETF Issuer||AUM ($M)||12-Month AUM
|The Principal Financial Group||554||1880%|
|Exchange Traded Concepts||2,515||717%|
|Franklin ETF Trust||611||217%|
|Victory Capital Management||1,200||213%|
Each of these issuers has found success—or resonance with investors—with different approaches.
For example, in the case of Columbia, which a year ago had only $13 million in AUM, the bulk of its assets came via acquisition. Columbia bought Emerging Global Advisors last year—a firm that had about $865 million in ETF assets.
Today Columbia manages 14 ETFs, with combined assets of over $1 billion. The largest Columbia ETF, the Columbia Emerging Markets Consumer ETF (ECON), with $726 million, raked in $68 million in net inflows and rallied about 15% in the past year. Asset growth is a direct result of inflows and strong market performance. The best-performing Columbia ETF in the past 12 months, the Columbia India Small Cap ETF (SCIN), posted gains of about 40%.
The Principal Group, at No. 2, is known as a provider of 401(k) retirement plans, mutual funds and insurance. The firm first launched an ETF in the summer of 2015. And when it came into the space, it said it had vast access to institutional as well as retail clients, many of which were looking for ETFs. In other words, Principal had a sales and distribution plan in place right out of the gates.
Targeting Institutional Investors
That plan was to initially focus on registered investment advisors, and “eventually” move into national accounts over time, as well as get on various platforms and target institutional investors, according to Paul Kim, managing director of ETF strategy at Principal.
About a year and a half later, Principal is seeing solid asset growth. Today the firm has six ETFs with total assets of about $554 million. The largest Principal ETF, the Principal EDGE Active Income ETF (YLD), with $280 million in assets, was not only the firm’s best-performing fund in the past year, with gains of 17%; it also attracted $236 million in fresh net inflows in that period.
At No. 3, Exchange Traded Concepts, a third-party ETF issuer known for its “ETF-In-A-Box” concept, has been busy growing its roster of ETFs. In the past 12 months, the firm grew its lineup of ETFs by 35% with the launch of five new funds. Today ETC manages 19 ETFs, with $2.5 billion in assets.
Smart Beta As New Core Portfolio
Legg Mason, at No. 4, has been making a strong push into the smart-beta segment, vocally making the case for smart beta as the new core of portfolios. Smart beta is all the rage in the ETF market these days—a segment that’s gathering massive assets month after month. Legg Mason’s asset-gathering pace suggests it’s finding a following, although it’s still relatively small, at about $152 million spread over seven ETFs.
At No. 5, John Hancock has also been carving a niche in the smart-beta space, with a lineup of 12 multifactor funds slicing and dicing U.S. equity sectors, as well as a total market ex-U.S. strategy, the John Hancock Multifactor Developed International ETF (JHMD).
The firm has also put several ETFs on the commission-free Charles Schwab platform—a move that’s targeted at expanding distribution. Asset growth of 653% in one year suggests John Hancock is doing something right.
And so the story goes, down the list. Every one of these smaller ETF issuers has their own spins on a story that’s unique to each, but basically the same—a combination of good strategies, aggressive marketing and distribution and, sometimes, smart acquisitions in the ETF space.
If we were looking for signs from the universe or interesting parallels between this data and the big picture, we could say that the impressive success of the small guys in an ETF market dominated by giants is only fitting for an investment vehicle that prides itself in democratizing access to all investors across all sorts of assets. But that’s if we were looking for a story line.
Here, the numbers speak for themselves. Asset growth among ETF issuers is pretty widespread, with the big getting bigger, and the small getting bigger. And if projections of more and more investors turning to ETFs for their low cost, tradability and tax efficiencies all turn out to be true, these type of growth numbers could become more the norm than the exception.
Contact Cinthia Murphy at [email protected]