The exchange traded fund industry has quickly accumulated over $2 trillion in assets under management, with investors piling into cheap broad market, smart-beta and some sector fund options.
The Vanguard 500 Index (NYSEArca: VOO) was the fastest-growing ETF over the three years ended December 31, growing to $27.6 billion in 2014 from $2.4 billion in 2011, reports Charles Stein for Bloomberg.
The Bloomberg ranking considers one-, two-, and three-year asset growth where one-year growth is weighted at 50% and two- and three-year growth are weighted 30% and 20%, respectively.
The rapid growth in VOO may be due to its cheap expense ratio of 0.05% but an average 1.4 million daily volume, which suggests that investors are utilizing VOO as a buy-and-hold option. In contrast, the SPDR S&P 500 ETF (NYSEArca: SPY), the largest S&P 500-related ETF, has a 0.09% and an average volume of 111.2 million shares, which indicates that many large players are using SPY to go in and out of the market.
Other dirt-cheap ETFS also made it on to the fastest-growth ETF list, including the Schwab U.S. Large-Cap ETF (NYSEArca: SCHX) and Schwab U.S. Broad Market ETF (NYSEArca: SCHB), the two cheapest ETFs on the market with a 0.04% expense ratio. Additionally, the Schwab ETFs trade commission-free on the Charles Schwab OneSource Platform. [Build a Dirt-Cheap Portfolio With These ETFs]
Some alternative index, smart-beta ETFs also made it on the top 10 list of fastest growing ETFs. The Guggenheim S&P 500 Equal Weight ETF (NYSEArca: RSP), which equally weights S&P 500 stock components, and the PowerShares FTSE RAFI US 1000 Portfolio (NYSEArca: PRF), which tracks a Research Affiliates index that selects stocks based on book value, cash flow, sales and dividends, have both quickly accumulated assets over the years as investors jumped on the long-term outperformance. For instance, PRF has outpaced the S&P 500 index since it started on Dec. 19, 2005, returning 120% compared to the 103% from the S&P 500. RSP has increased an average annualized 9.3% over the past 10-years while the S&P 500 returned 7.9%. [The Growing Smart-Beta ETF Space]
Investors have also been chasing performance in the healthcare space. The Vanguard Health Care ETF (NYSEArca: VHT) and iShares Nasdaq Biotechnology ETF (NasdaqGS: IBB) where among fastest growing ETFs as the funds outpeformed the broader markets, rising average 28.9% and 43.7% over the past three years, respectively.
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Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. 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.