Smaller ETF Issuers Poised to Continue Gaining Market Share

Leading issuers see market share decline.

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Reviewed by: Heather Bell
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Edited by: Heather Bell

The total number of exchange-traded fund issuers has more than doubled from 94 at the end of 2017 to 220 as of late 2022, with the influx of smaller issuers at least partially driving the erosion of the market share of the top ETF issuers, according to ETF.com data. 

BlackRock, State Street Global Advisors and Vanguard have seen their claim on the market share of the U.S. ETF industry gradually decline over the last six years, even as the total number of assets has climbed above $6.7 trillion.  

Their combined assets under management grew from $2.8 trillion at the end of 2017 to $5.2 trillion in the final weeks of 2022. As 2017 ended, the top three firms represented 82.3% of the total domestic ETF marketplace, compared with 77.9% at the end of 2022. Of course, 4.4 percentage points over six years is not a huge decrease for the top three, and none of those firms is in any kind of peril.  

As the top three have seen their market share decline, the tier of the three ETF issuers below them have seen their market share increase by 2.7 percentage points. Invesco, Charles Schwab and First Trust have grown from representing 8.6% of all U.S.-listed ETF assets at end of 2017 to representing 11.2% by the final weeks of 2022. 

If you look at the top six ETF issuers from the beginning of 2017 to mid-December 2022, their percentage of total U.S.-listed ETF assets has fluctuated from 89.9% at the end of 2017 to 91.7% at the end of 2020 then down to 89% in late 2022.  

Since the ETF Rule passed in September 2019, the path to launch an ETF has been streamlined, allowing custom baskets for actively managed ETFs and enabling such funds to more fully access the tax benefits of the ETF structure.  

Dimensional Fund Advisors has noted how pivotal that change was, acknowledging that allowing custom baskets for actively managed ETFs was instrumental in its decision to enter the ETF market.  

Although 2020, the first year of the pandemic, saw the number of issuers increase by just 7.4%, it also saw a record number of launches relative to previous years. 2021 saw an increase of about 38.2% in the number of issuers and another record-breaking number of launches.  

Year to date, 2022 has seen a slight slowdown in launches from the prior year, and an increase in the number of issuers of just 21.5%, a significant drop-off from the prior year’s increase.  

The top three ETF issuers are likely to continue to lose market share as increasing numbers of issuers enter the market, as existing issuers establish longer track records for their funds and attract more investor dollars. 

 

Contact Heather Bell at [email protected] 

Heather Bell is a former managing editor of etf.com. She has also held editorial positions at Dow Jones Indexes and Lehman Brothers. Bell is a graduate of Dartmouth college and resides in the Denver area with her two dogs.