ETF Issuers See $7B In Revenue

January 14, 2019

BlackRock: 43% Of All ETF Revenue

Not surprisingly, the lion's share of revenue went to BlackRock, which is also the industry's largest issuer. Last year, iShares ETFs took in roughly $3 billion in revenue, or about 43% of the industry total.

State Street Global Advisors, the next highest issuer, made $950 million on its funds, while Vanguard rounded out the top three, with $634 million in revenue.

Intriguingly, a third of the top 15 highest-revenue issuers—State Street, ALPS, WisdomTree, Northern Trust and Deutsche Bank—saw net investment outflows last year, yet they still walked away from 2018 with positive ETF revenue.

"Assets and revenue are usually correlated," Balchunas writes in the report, noting that the more assets an issuer pulled in, the higher its revenue tended to be.

However, there were at least two exceptions: Direxion's leveraged/inverse products carry hefty fees, helping the firm to draw more revenue from each fund; while Schwab’s ultra-low price tag on its ETFs has served to hamper its overall revenue growth.

High-Volume ETFs Make Most Money

Intriguingly, none of 2018's highest-revenue ETFs were launched in the last 10 years, and in fact, most launched at least 15 years ago. As such, most were first-movers in their respective space, giving them a chance over time to build up massive liquidity and establish themselves as the preferred vehicles for short-term traders.

Take EEM: Though it's the 23rd-largest ETF, it ranks second in terms of overall revenue; it's also the third-most-highly traded ETF on the market today.

"Many short-term-oriented bigger investors overlook [EEM's] above-average 0.69% fee because it trades more than $2 billion a day," wrote Balchunas in the report.

All 10 highest-revenue ETFs are among the top 50 ETFs with the highest average daily trading volume, while five are among the top 10 highest-volume ETFs:

 

Top 10 ETFs, Ranked By Revenue & Volume
Ticker Fund Rank In Assets Rank In Avg. Daily Volume Launch Year
SPY SPDR S&P 500 ETF Trust 1 1 1993
EEM iShares MSCI Emerging Markets ETF 23 3 2003
EFA iShares MSCI EAFE ETF 6 5 2001
GLD SPDR Gold Shares Trust 19 22 2004
QQQ Invesco QQQ Trust 7 2 1999
IWM iShares Russell 2000 ETF 14 4 2000
IWF iShares Russell 1000 Growth ETF 15 49 2000
VWO Vanguard FTSE Emerging Markets ETF 9 28 2005
IWD iShares Russell 1000 Value ETF 16 40 2000
EWJ iShares MSCI Japan ETF 47 35 1996

Tables sources: Bloomberg, ETF.com; data as of Jan. 11, 2019

 

That said, there's a continuity element as well. Buy-and-hold investors who entered these older funds early have an incentive not to shift to cheaper funds, because they'd end up paying (potentially sizable) taxes on whatever gains they'd realize. Hence these investors remain in the older, more expensive products.

Contact Lara Crigger at [email protected]

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