How Has Competition In The U.S. ETF Industry Evolved In The Last 5 Years?

by Trefis Team
-1.72%
Downside
407
Market
400
Trefis
BLK
BlackRock
Rate   |   votes   |   Share

The five largest exchange-traded fund (ETF) providers – BlackRock, Vanguard, State Street, Invesco and Charles Schwab – together manage almost 90% of the ~$2.8 trillion in U.S. ETF assets. Notably, the market share of the top-3 ETF providers is a commanding 82%.

ETF_QA_US_MarketShare_16Q3

Source: U.S. ETF assets by issuer (ETF.com) as of March 15 2017

The ETF industry has grown at break-neck speed since the economic downturn of 2008, as the convenience and transparency ETFs provide to investors helped boost global ETF assets under management from around $800 billion in 2007-08 to more than $3.8 trillion now. [1] Over recent years, the intensifying competition among ETF providers has also triggered a price war among incumbents – making ETFs a more cost-effective investment option for retail investors as well. This growth is likely to continue in the near term, as the industry is expected to grow to over $7 billion by 2021. [2]

U.S. ETFs form a majority of the global ETF industry, with total assets across U.S. ETFs making up more than 70% of all ETF assets worldwide, so the major U.S. players have a significant share of the global industry as well. The table below has been compiled from data gathered by ETF.com and captures the changes in U.S. ETF assets for the largest ETF providers in the country over the last five years.

ETF_QA_US_SizeChange_FY16

It should be noted that although the four largest ETF players in the country have remained unchanged over this period (with Vanguard grabbing the #2 position from State Street in 2014), the #5 position was held by VanEck in 2012, and by WisdomTree from 2013-15, before Charles Schwab captured the position in 2016.

Notably, the total size of the U.S. ETF industry has swelled by more than 17% annually over 2012-16. While the top five industry players have cumulatively grown at this rate, the biggest factor behind this is Vanguard’s exceptional growth rate of 26% annually thanks to its rapidly growing base of extremely low-cost ETF offerings. That said, BlackRock’s growth has also been impressive – especially since it already had a sizable asset base by 2012. On the other hand, State Street’s position has slipped steadily over recent years with investors switching to cheaper alternatives offered by competitors (especially Vanguard).

You can see how changes to BlackRock’s equity ETF assets (marketed under the iShares brand) affect our price estimate for the company by modifying the chart below.

See full Trefis analysis for BlackRock | State Street | Charles Schwab

View Interactive Institutional Research (Powered by Trefis):
Global Large CapU.S. Mid & Small CapEuropean Large & Mid Cap
More Trefis Research

Notes:
  1. ETFGI Statistics []
  2. Global ETF assets under management set to exceed $7 trillion by 2021, PwC Report []
Rate   |   votes   |   Share

Comments

Name (Required)
Email (Required, but never displayed)
Be the first to comment!