Big 3 Continue Dominating ETF Industry

Assets under management in the exchange-traded funds continue ascending to new records and in the U.S., the world's largest ETF market, that means ongoing dominance for the three largest ETF providers. Those being BlackRock Inc. BLK's iShares unit, Vanguard and State Street Corp. STT's State Street Global Advisors.

As of Sept. 20, those three providers combined for 83 percent share of the U.S. ETF market, up from 81 percent at the end of the third quarter, according to CFRA Research. 

As of Sept. 21, iShares had $1.25 trillion in U.S. ETF assets under management while Vanguard and SSgA combined for nearly $1.3 trillion. Year to date, each of the top 10 asset-gathering ETFs in the U.S. are iShares or Vanguard funds with six being the former's products.

Expect Growth To Accelerate

With active managers continuing to struggle to beat their benchmarks and fees on mutual funds still high relative to ETFs, industry observers widely expect low-fee ETFs to continue swiping market share from pricier active products.

The iShares Core S&P 500 ETF IVV has an annual fee of just 0.04 percent, or $4 on a $10,000 investment. IVV has added nearly $23 billion in new assets this year, more than any other ETF. The iShares Core MSCI EAFE ETF IEFA has seen 2017 inflows of nearly $16 billion, second-best behind IVV. IEFA charges just 0.08 percent per year, good for one of the lowest fees among international ETFs.

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“iShares has been the biggest beneficiary of the ETF asset growth, expanding its industry-leading share to 40.1 percent, up from 38.8 percent nearly two years ago,” said CFRA Director of ETF & Mutual Fund Research Todd Rosenbluth. “Assets in IVV, the firm's largest ETF, doubled to $127 billion, driven by a combination of its performance record and net inflows. Meanwhile, iShares Core MSCI Emerging Markets ETF IEMG and IEFA increased five-fold to $38 billion and $35 billion, respectively, since the end of the third quarter.”

Vanguard On The Rise

Pennsylvania-based Vanguard's ETF ascent is widely attributed to the company carrying over its low-cost index fund legacy to the ETF space. Across equities and fixed income, Vanguard ETFs are among the least expensive on the market. That includes well-known, diversified equity products such as the Vanguard Total Market ETF VTI and the Vanguard S&P 500 ETF VOO.

“At the same time, Vanguard's market share climbed 250 basis points to 25.2 percent,” said Rosenbluth. “The firm's largest offering, VTI now has $127 billion in assets, up 62 percent from the end of 3Q 2017. Meanwhile, VOO more than doubled in size to $73 billion; VTI holds small, mid and large-cap stocks, while VOO and peer IVV focus only on large caps.”

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