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
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.