ETF buying is on pace to break last year’s record based on inflows during the first four months of 2013 as smaller funds get more attention from investors.
The U.S. ETF business is famously top-heavy with the so-called Big Three of BlackRock’s (NYSE: BLK) iShares, State Street Global Advisors (NYSE: STT) and Vanguard together accounting for more than 80% of the assets under management. [State Street ETF Market Share Slips]
However, other ETF providers such as WisomTree Investments (NasdaqGM: WETF) are coming on strong to challenge the largest companies. [Smaller, New ETF Providers Try to Chip Away]
In general, it’s tough for smaller firms to compete against the established ETFs that track broad, well-known stock and bond indices. Some of the most-successful new ETFs target market niches such as bank loans and dividend stocks. And providers are also hitting pay dirt with complex ETFs that mimic specialized or active strategies.
For example, WisdomTree Japan Hedged Equity (NYSEArca: DXJ) is the best-selling ETF this year with inflows of about $5.6 billion. The fund invests in Japanese stocks but hedges its currency exposure to the yen. [WisdomTree Shares Rally on Higher Profit, ETF Flows]
Next page: Spreading the ETF wealth
In other words, the wealth is being spread around more evenly in the U.S. ETF business, which is off to a great start this year. For example, year to date net inflows were about $65.29 billion at the end of April, according to XTF.com.
That puts ETF flows on pace for about $196 billion for the year. Investors poured a record $188 billion into U.S.-listed ETFs in 2012, eclipsing a previous record of more than $175 billion in 2008, according to IndexUniverse.
“However, what we see as most impressive is how the flows are starting to spread out beyond just the Top 50 or Top 100 Funds,” said Dan Weiskopf at Forefront Capital in a note this week. [What It Takes for ETF Providers to Make It on The Street]
“Since December 31, 2012, AUMs in the Top 50 and 100 ETFs have declined from 69% and 82% of AUMs to 62% and 77%, respectively,” Weiskopf wrote. “Most impressive has been the fact that ETFs with AUMS of greater than $250 million in AUMs has increased from 180 to 417 ETFs and there has been nearly a tripling of the number of ETFs with AUMS between $250 million and $2 billion.”
As of May 1 there were 1,460 exchange traded products listed in the U.S. from 48 fund sponsors, according to XTF. Total assets stand at about $1.5 trillion and average daily trade volume is roughly $58 billion.