Exchange traded funds are the fast-growing segment of the asset management business but some consolidation is expected as the industry weeds out unpopular funds.
Over 90 exchange traded products are expected to close in 2012, the most ever in a year, Bloomberg News reports.
The business is known for being top-heavy with the three largest providers BlackRock (NYSE: BLK), State Street (NYSE: STT) and Vanguard dominating market share. [ETF Providers: Go Big or Go Home?]
Recent fee cuts at some large providers including Charles Schwab (NYSE: SCHW) are creating even more competition, especially in diversified ETFs where cost is an even more important factor when choosing funds. [Smaller ETF Firms Feeling the Heat]
Some smaller firms are prospering, however, by offering specialized ETFs that use leverage or track nontraditional benchmarks that don’t weight stocks by market cap, for example. [WisdomTree Welcomes ETF Fee, Index Wars]