ETF Issuer Revenue Hits New Record

December 10, 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 ecosystem. ETF Think Tank produces this monthly report for ETF.com.

 

Launches & Closures

As of Dec. 2, there are currently 2,310 ETFs listed in the U.S., up only three from last month. The 12-month trailing number of new launches is 239, down from 264 since the July 2019 report.
 

A declining number reflects that investor choice and ETF innovation may be slowing. The number of closures was at 159, which leads to a 1.50 open-to-close ratio (239/159).

A year ago, as of Dec. 3, 2018, the open-to-close ratio was at 1.45, and generally this trend has been around that range.

However, closures sometimes overtake launches when issuers make bulk announcements in the product lineup. On Oct. 18, 2018, the ratio was 1.75, with 290 launches and 166 closures. On March 4, 2019, the ratio went as low as 1.03, when 222 launches were almost overtaken by 215 closures. A 1.50 open-to- close KPI shows issuers remain optimistic about new launches and creative ETF ideas.

 

Assets Grow While Influence Diversifies

As of Dec. 2, 2019, U.S. ETF assets were $4.27 trillion, an all-time high. That’s an increase of about 26.56% year to date. Another KPI of significance is the “ownership influence score.”

The “average ETF ownership influence score” has declined this year, from 8.25% stock ownership at the beginning of 2019 to 7.50%, as flows have tilted toward fixed income.

The ownership influence score is the average amount of the market cap of every U.S. stock owned by ETFs.

 

Revenue Hits New Record

The average weighted expense ratio for U.S. ETFs remains steady, at 0.19%. However, due to increased assets, the 12-month projected revenue from expense ratios has increased to a new high of $7.944 billion, up from $6.83 billion in December 2018.

 

For a larger view, please click on the image above.

 

The revenue also continues to diversify away from low-cost, traditional beta toward nontraditional passive “smart beta” ETFs and active ETFs.

The percentage of ETF revenue from nontraditional passive ETFs as of Dec. 31, 2018, was 36.38%; today it is at 38.84%. Active ETF revenue also gained market share, growing from 5.11% to 5.81%. Traditional passive still represents 55.34% of revenues, but this is down from 58.52%.

These KPIs help show that investors are still looking for interesting and creative strategies to help diversify their portfolios.

 

Issuers Consolidating

The number of branded issuers has declined from its peak of 144 in June 30, 2019, this year to 141, but remains substantially higher than from 134 on Dec. 31, 2018, which is a 5% increase.

That said, the market share dominance of measured by assets under management is iShares (38.99%), Vanguard (25.94%), State Street (16.02%) and Invesco (5.14%), representing 80.95% of all U.S.-listed ETF assets.

Invesco’s market share is relevant in the context of the overall revenue picture. There the gap between iShares, State Street and Vanguard at 41.64%, 14.01% and 8.55% vs Invesco at a close 8.14% is narrower.

 

Contact Dan Weiskopf at d[email protected]

 

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