In the solar system of exchange-traded funds (ETFs), those with the most assets sort of serve as black holes equipped with the marketing and promotional resources to swallow up investment capital to potentially increase their growth. With the latest ETF ruling by the Securities and Exchange Commission (SEC), the competition for assets could get even more fierce.
Dubbed the “ETF Rule,” the new legislation is slated to “modernize regulation of exchange-traded funds” within the capital markets. In essence, this will hopefully help firms become more innovative with their ETF products, increasing competition among peers in a mad dash for more assets.
“I think we could see more products from more issuers. It lowers the bar for a new issuer to come into the space and launch an ETF,” said Jay Jacobs, senior vice president and head of research and strategy at Global X ETFs. “To be fair, over the last 10 years, that bar has been getting lower and lower and lower as more people have become ETF issuers and gone through the process. But there was still a bar there. Now that bar has effectively been taken away, so it’s much more streamlined for someone to become an ETF issuer.”
Additionally, firms can look to become more competitive by lowering their costs, but just how low can they go and will it be effective?
Per a CNBC report, of “$80 billion in ETF flows in the third quarter, $57.1 billion went into ETFs that charge 10 basis points (0.10%) or less. Another $16 billion flowed into ETFs charging between 11 and 20 basis points; and $13 billion to ETFs charging 21 to 40 basis points, according to Bloomberg data. Anything above that fee level and the flows were negative.”
To those in the industry, they thought lowering fees would have a more tangible impact.
“I thought free or rebated products would be more popular than they’ve been given the investor infatuation with minimal expense ratios,” said Todd Rosenbluth, senior director of mutual fund and ETF research at CFRA. “If you screen solely based on expense ratio these products would be at top of the list.”
As the biggest and baddest of the ETF industry duke it out with prices, here are the top 10 funds when it comes to assets under management:
|SPY||SPDR S&P 500 ETF||$266,547,683.96|
|IVV||iShares Core S&P 500 ETF||$185,633,758.46|
|VTI||Vanguard Total Stock Market ETF||$121,593,986.88|
|VOO||Vanguard S&P 500 ETF||$117,121,121.25|
|VEA||Vanguard FTSE Developed Markets ETF||$71,426,226.84|
|AGG||iShares Core U.S. Aggregate Bond ETF||$65,884,169.03|
|IEFA||iShares Core MSCI EAFE ETF||$64,157,177.08|
|VWO||Vanguard FTSE Emerging Markets ETF||$60,910,224.45|
|EFA||iShares MSCI EAFE ETF||$58,115,093.28|
For more market trends, visit ETF Trends.