A Way to Play the Providers Behind the Rapid Growth of ETFs

As investors continue to pour money into the fund industry, the sponsors behind ETFs have been riding the rapid growth spurt.

According to ETFGI data, shares in BlackRock, the largest provider of ETFs by market share and the company behind the iShares lineup, have outperformed the wider market, surging 35% year-to-date, compared to the 18% advance for the S&P 500, reports Miles Johnson for the Financial Times.

Shares of other financial companies that dabble in the ETF space have also beaten the market. For instance, State Street, which offers the line of SPDR ETFs, gained 25% this year while Invesco, the company behind PowerShares, increased 21%.

Johnson pointed out that investing in low-cost tracker funds may be rewarding but investing in the increasingly consolidated industry that provides them may be a more attractive play.

“The strong performance of these companies may be hinting that investors and analysts are in the middle of a process of radically reappraising what type of businesses they really are. Instead of being boring, low-growth fund managers, they increasingly may be seen as something closer to highly entrenched, high-margin toll roads for trillions of dollars of retirement savings that need to be invested in financial markets over the coming decades,” Johnson said.