ETF Success Found At Different Levels

When you hear talk about the ETF issuers and the industry, certainly much of it has to do with how the big ETF issuers keep getting bigger, and that while the barrier to entry for a new fund is low, the threshold for success is very high, especially for smaller players.

While much of that may be true, it’s easy to fall into the trap that success is too steep a hill to climb for most, because in fact, it can really be found at all levels of the ETF spectrum.

Of course, at the top end of the ETF League is BlackRock’s iShares brand, which should soon become the first issuer to amass $1 trillion in assets. As of the end of July, the firm had some $915 billion, nearly $100 billion more in assets under management than it had at the end of July 2015. You don’t need to be a math whiz to see that the $1 trillion mark could easily be achieved in 2017.

And Vanguard, the No. 2 ETF issuer as measured by AUM, has also had a strong past 12 months, going from roughly $477 billion to $560 billion in those same 12 months, which is a bigger percentage increase than iShares. Few would be surprised by those two examples of success. We hear about them all the time.

Size Doesn’t Matter

But the point of this piece is to shed some light on a few success stories that are not as apparent or repeated. Case in point would be Charles Schwab, which, in percentage terms, had a better 12 months in attracting assets than the oft-talked-about Top Two.

The firm has been quietly climbing the ETF leader board, and last month, the firm topped $50 billion in assets, up more than 40% from its assets level of about $35 billion at the end of July 2015, making it now the fifth-largest ETF issuer.

The company has been offering commission-free Schwab ETFs on its platform, and has become the leader in cutting expense ratios as well. Out of the 20 cheapest ETFs on the U.S. market, 10 are from Schwab—double the nearest competitor, iShares, which has five.

20 Cheapest ETFs

Ticker	Fund	Issuer	Expense Ratio
XLRE	Real Estate Select Sector SPDR Fund	SSgA	0.00%
EWRE	Guggenheim S&P 500 Equal Weight Real Estate ETF	Guggenheim	0.00%
SCHB	Schwab U.S. Broad Market ETF	Charles Schwab	0.03%
SCHX	Schwab U.S Large-Cap ETF	Charles Schwab	0.03%
ITOT	iShares Core S&P Total U.S. Stock Market ETF	BlackRock	0.03%
VTI	Vanguard Total Stock Market Index Fund	Vanguard	0.05%
VOO	Vanguard S&P 500 Index Fund	Vanguard	0.05%
SCHZ	Schwab US Aggregate Bond ETF	Charles Schwab	0.05%
BND	Vanguard Total Bond Market Index Fund	Vanguard	0.06%
SCHG	Schwab U.S. Large-Cap Growth ETF	Charles Schwab	0.06%
SCHV	Schwab U.S. Large-Cap Value ETF	Charles Schwab	0.06%
IVV	iShares Core S&P 500 ETF	BlackRock	0.07%
SCHD	Schwab US Dividend Equity ETF	Charles Schwab	0.07%
SCHA	Schwab U.S. Small-Cap ETF	Charles Schwab	0.07%
SCHH	Schwab U.S. REIT ETF	Charles Schwab	0.07%
SCHM	Schwab U.S. Mid-Cap ETF	Charles Schwab	0.07%
SCHP	Schwab US TIPS ETF	Charles Schwab	0.07%
IUSG	iShares Core U.S. Growth ETF	BlackRock	0.07%
IUSV	iShares Core U.S. Value ETF	BlackRock	0.07%
AGG	iShares Core U.S. Aggregate Bond ETF	BlackRock	0.08%

 

Schwab has also helped itself with its robo service, Intelligent Portfolios, which uses Schwab ETFs to deliver automated portfolios for the masses. Certainly that ecosystem of commission-free ETFs—very cheap to own ETFs and a robo service using Schwab ETFs—is fueling growth in a unique way.