Markets

Top ETF Industry Trends and Strategies in the First Half of 2013

In the first half of 2013, just one new ETF/ETP launched in the US joined the exclusive blockbuster or Billion Dollar Club.

Many ETF/ETP managers adjust their product offerings hoping to create and develop best-selling products that will enter the exclusive blockbuster or Billion Dollar Club, a milestone that indicates $1 billion in assets under management. Popular with investors, these are profitable and blockbuster products for firms. At the end of H1 2013, there were 1,478 ETFs/ETPs with assets of $1.44 trillion from 54 providers listed on three exchanges in the United States.

Just 14% or 201 of the ETFs/ETPs listed in the US have joined the exclusive blockbuster or Billion Dollar Club. The top 100 ETFs/ETPs ranked by assets, out of the 1,478, account for just over three quarters of the $1.44 trillion in assets. The top 20 or the top 1% of all ETFs/ETPs ranked by assets account for 40% of all assets.

top 20 chart

The break-even point for a fund or ETF used by many consultants is $100 million in assets. Fifty-seven percent of all ETFs/ETPs in the US have assets below $100 million Forty-six percent ETFs/ETPs have less than $50 million in assets and twenty-two percent of the ETFs/ETPs have less than US$10 million in assets.

If ETFs fail to gain a critical level of assets after a number of years, the provider is likely to consider adjusting their product set. In the first half of 2013, 42 ETFs/ETPs closed. In fact, this year has seen a significantly larger amount of closures than there were at the same point in 2012, when 17 products had delisted or merged. 2011 had only 1 and 2010 had 23 . The ETF insdustry is on track to break last year’s record number of 100 closures.

In H1 2013, 73 new ETFs/ETPs were launched by 25 providers on 3 exchanges. At the same point last year, there were 124 new products compared to 190 in the first half of 2011 and 104 over the same period in 2010. However, new product launches in 2013 have outpaced those in 2009 when there were only 48 new products year-to-date.

The 73 new launches in H1 2013 have gathered $3.61 billion in assets year to date. In addition to the new product launch that entered the Billion Dollar Club, eight product launches have gathered between $100 million and $1 billion. Four products have gathered between $50 million and $100 million and 82% or 60 new launches have gathered less than $50 million year to date.

Nearly half of the new product launches in the first half of 2013 were on equity benchmarks while eighteen percent were on fixed income benchmarks and fourteen percent were for active accounting.

Eighty-eight percent of the new launches were ETFs as defined by the US Securities and Exchange Commission (SEC) (Under the 1940 Act, ETFs as funds register as either an open-end investment company or as a unit investment trust. An ETF is a fund that allows an investor to buy and sell shares in a single security that represents a fractional ownership of a portfolio of securities.)

The term ETF does not cover other types of exchange-traded products (ETPs), such as exchange traded notes (ETNs), exchange-traded commodity funds (ETCs), and exchange traded vehicles (ETVs). The distinction between ETFs and other ETPs is important, as funds are highly regulated and follow prescriptive guidelines on the types of investments they can make, diversification, and exposure, how fees and costs are shown, and the tax and regulatory treatment for investors is often different.

first half

Top 20 ETF/ETP launches in H1 2013 in the US

Name Ticker Total Assets Jun-13 ($ Mn)
FI Enhanced Global High Yield ETN FIGY 1,051.80
SPDR Blackstone/GSO Senior Loan ETF SRLN 327.7
FI Enhanced Europe 50 ETN FEEU 277.4
Vanguard Total International Bond ETF BNDX 258.9
Barclays ETN+ Select MLP ETN ATMP 142.6
iSharesBond 2018 Corporate ex-Financials Term ETF IBCC 120.9
iShares MSCI USA Momentum Index Fund MTUM 107.3
iShares MSCI USA Value Weighted Index Fund VLUE 106.3
iShares MSCI USA Risk Weighted Index Fund SIZE 104.9
Cambria Shareholder Yield ETF SYLD 85.1
AdvisorShares Newfleet Multi-Sector Income ETF MINC 83.4
First Trust Preferred Securities and Income Fund FPE 75.2
Vanguard Emerging Markets Government Bond ETF VWOB 68.4
iSharesBond 2020 Corporate ex-Financials Term ETF IBCD 47.5
Barron\'s 400 ETF BFOR 43.3
Global X SuperDividend US ETF DIV 39.2
iSharesBond 2023 Corporate ex-Financials Term ETF IBCE 37.1
iPath S&P MLP ETN IMLP 35.8
First Trust High Yield Long/Short ETF HYLS 32.2
ProShares High Yield-Interest Rate Hedged ETF HYHG 27.3

Source ETFGI Monthly Insight Report end of First Half 2013

closures

Uncertainty surrounding the future of QE programs and market volatility caused investors to withdraw US $10.24 billion from ETFs and ETPs listed in the United States in June 2013. Fixed income ETFs/ETPs experienced the largest net outflows with $6.02 billion, followed by equity ETFs/ETPs with $3.39 billion, and commodity ETFs/ETPs with $1.37 billion.

Year-to-date through end of H1 2013, ETFs/ETPs have seen net inflows of $74.610 billion which is similar to the $75.679 billion of net inflows at this time last year. In H1 2013 Equity ETFs/ETPs gathered the largest net inflows YTD with $76.34 billion, followed by fixed income ETFs/ETPs with $6.38 billion, and active ETFs/ETPs with $4.21 billion, while commodity ETFs/ETPs experienced the largest net outflows YTD with $19.31 billion

Average daily trading volumes in ETFs/ETPs in June were $83.36 billion, representing an increase of 32.9% from May.

Vanguard, while ranked 3rd in terms of ETF/ETP assets, is ranked first in asset gathering net new assets in H1 2013 with US $26.98 billion in net inflows. iShares, ranked 1st in terms of assets, had net out flows of US$9 billion in June, and ranked 2nd in net inflows with US$12.3 billion year to date. SPDR ETFs, ranked 2nd in assets, had net out flows of US$2.4 billion in June, and net outflows of US$6 billion year to date. Powershares, ranked 4th in assets, also ranked 4th in net inflows with $6.56 billion. Wisdom Tree ranked 5th in terms of assets ranked 3rd in asset gathering with $10.87 billion of net inflows.

To subscribe to the full ETFGI monthly insight first half of 2013 report please visit www.etfgi.com.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Deborah Fuhr

Deborah Fuhr, partner and co-founder of ETFGI, an independent research and consulting firm providing services to investors and the ETF industry. Prior roles Global Head of ETF Research and Implementation Strategy and a Managing Director at BlackRock/BGI for 3 years and Managing Director and head of the Investment Strategies Group for 11 years.

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