Exchange traded fund assets remain concentrated in the three largest firms, but smaller companies offering specialized ETFs are making progress chipping away at market share.
Heavyweights iShares, State Street and Vanguard are seeing more competition as the smaller ETF providers step up their game, reports Jackie Noblett for Ignites.
Alps gathered at least $650 million in asset inflows this year thanks to the success of Alerian MLP ETF (NYSEArca: AMLP). [ETF Spotlight: Master Limited Partnerships]
WisdomTree gained $338 million year-over-year, while commodities and international ETF expert Global X touts about $521 million in asset under management this year, up from $144 million, according to the Ignites report.
“Some investors and advisors may be wary of investing in a smaller firm because they’ve seen firms come and go. But if you achieve some level of success, people may be more comfortable,” says Alec Papazian, senior analyst at Cerulli Associates.
Rob Ivanhoff of Financial Products Research states the largest firms” have a lot more to lose.” [ETFs Take on Popular Mutual Funds.]
A larger firm may have to grapple with how its client base will react ETFs, and how the new tool will sit with the other investments, mutual funds, and the overall image. The smaller firms are ETF-based, so the aforementioned is not a factor. Rather, they distinguish themselves with targeted funds in sectors that are already displaying investor demand. [ETF Usage Will Double By 2012.]
“Where we’ve seen success is where firms view ETFs as really just another delivery vehicle. If you give people exposure in areas where they’ve already expressed interest before, you’re probably going to get interest,” said Paul Justice, director of North American ETF research at Morningstar, in the Ignites story.
An example of this tactic is Van Eck, which oversees single-country and commodities ETFs. Rydex SGI has been able to reach investors with a lineup of currency ETFs, while Charles Schwab has gained investor interest with commission-free trading for clients. [Schwab Sees Growth in ETF Business.]
Tisha Guerrero contributed to this article.