Exchange traded fund providers can be a good place for investors to gather research and knowledge about various funds. It can be just as powerful to look under the hood of an ETF provider as it is to look under that of the fund.
There are currently 4 fund providers that hold the lion’s share of ETF industry assets, and examining their style and approach can help in the decision making process.
“iShares, State Street Global Advisors, Vanguard and PowerShares, combined, had an 88% share of the total ETF asset base as of May 12 and offered 60% of the equity ETFs that received an overall ranking from S&P Capital IQ as of June 2012. Some of the other providers offer compelling equity products that stand out, in our opinion, low expenses, high dividends, or exposure to single countries,” Todd Rosenbluth, analyst at S&P Capital IQ, wrote in a recent note.
The top ETF providers are continually getting bigger through added assets under management. For example, State Street Global Advisors collected inflows of about $9 billion last month to lead all ETF providers. It is the second-largest ETF manager with $291 billion in assets, according to Morningstar. [How to Lower Investment Fees with ETFs]
BlackRock’s iShares is the largest with $482 billion while Vanguard follows State Street with $209 billion. Here is a general rundown of details regarding the big four: [What You Need to Know About ETFs]
- iShares: This provider offers the most ETFs and offers the third lowest average expense ratio. iShares dividend yields are the highest. Overall ETF market share is 41%
- State Street: This provider comes in third for the most ETFs offered, second with the average lowest expense ratio, and second for the highest average dividend yield. 24% of the ETF market is dominated by SSGA, and this provider was the first to launch an ETF, the SPDR S&P 500 ETF (NYSEArca: SPY).
- Vanguard: Comes in fourth for the number of ETF offerings, with the least number of funds available. The provider is third as far as market share, at 18%. Vanguard has the strongest offering of U.S. equities.
- PowerShares: This provider comes in fourth for lowest average expense ratio, and for highest dividend yield. The provider has about 5.5% of the market share. One of the providers most popular offerings is the new low volatility-focused fund, the PowerShares S&P 500 Low Volatility Portfolio (NYSEArca: SPLV). [ETF Growth Creates Need for More Education]
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.