Who's Winning The ETF Race?

January 05, 2010


$6.0 billion in AUM
$24 million in estimated fees
Largest ETF: Rydex S&P Equal Weight ETF (NYSE Arca: RSP), $1.6 billion

Rydex’s ETF efforts seemed to lose steam when the company was sold to Security Benefit in 2007. The company hasn’t launched many new successful funds since then, and has not been particularly aggressive in marketing its existing funds to investors.

Still, Rydex has two crown jewels: the $1.6 billion Rydex S&P Equal Weight ETF (RSP) and the hugely successful CurrencyShares lineup. The CurrencyShares account for $3.1 billion of Rydex’s $6 billion in assets under management, and hold unique niches in the ETF space (there are competitors, but not completely overlapping).

As a whole, however, Rydex has sat mostly still while other providers have eaten into its territory. The company needs to be a bit more aggressive if it wants to protect its franchise.

$5.6 billion in AUM
$44 million in estimated fees

Largest ETN: iPath DJ-UBS Commodity ETN (NYSE Arca: DJP), $2.0 billion

Barclays has shown that, despite the credit crisis, investors haven’t entirely given up on exchange-traded notes. The leading ETN issuer has $5.6 billion in assets under management and booked $2.6 billion in net inflows in the first 11 months of 2009.

The company’s lineup is led by the $2.0 billion iPath DJ-UBS Commodity ETN (NYSE Arca: DJP) and the $1.2 billion iPath MSCI India Index ETN (NYSE Arca: INP). Unfortunately, at press time, INP had stopped creating new shares after Barclays ran afoul of reporting requirements with the Indian stock exchanges. It remains to be seen whether that stoppage pushes investors into alternate Indian equity products.

Still, all in all, the future looks bright—perhaps surprisingly so—for Barclays. More investors are realizing the tax benefits of the ETN structure in the commodities sector, and concerns about credit risk will subside. Meanwhile, the company is pushing forward with new and innovative products, such as the novel long-term leverage ETNs it launched in November.

Who's Winning The ETF Race?


$5.1 billion in AUM
$48 million in estimated fees
Largest ETF: Direxion Daily Financial Bull 3x Shares (NYSE Arca: FAS), $1.3 billion

After Vanguard, Direxion had the most impressive year of any ETF company in 2009. It wasn’t even in the ETF business two years ago, but Direxion is now the 12th-largest ETF company by assets and the seventh largest by revenues. Its family of triple-leverage ETFs pulled in $5.7 billion in inflows for 2009 through November, the fifth-largest amount of any company.

If Direxion has a problem, it is the performance of its funds: As of Nov. 30, it had only $5.1 billion in assets under management, about $600 million less than it received in inflows for the year.

Still, Direxion isn’t going away. Investors like triple leverage, and the funds are increasingly well-traded. Look for strong inflows to continue.

$2.7 billion in AUM
$18 million in estimated fees

Largest ETF: Claymore/BNY Mellon BRIC ETF (NYSE Arca: EEB), $1.0 billion

Like PowerShares, Claymore is a bit of an odd bird in the ETF industry. It has a number of highly successful and interesting products, but they all operate on the fringes. While it’s a strong player in the satellite parts of people’s portfolios, it hasn’t been able to tap into the core.

The closest it comes to a core holding is its highly successful Claymore/BNY Mellon BRIC ETF (EEB), a $1 billion fund that some investors use for core emerging markets exposure. After that, its largest funds, in order, are a Chinese small-cap ETF (NYSE Arca: HAO), a water fund (NYSE Arca: CGW) and a solar energy ETF (NYSE Arca: TAN).

Recently acquired by Guggenheim, the big questions facing Claymore are now where it will take its franchise and how aggressively Guggenheim wants to invest in its new asset.


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