The ETF and Index Industry in 10 Charts: The Rise and Rise of the Passive Industry

Thársis Souza, PhD
Jul 8 · 4 min read

The past decade observed a shift from active to passive investing with a massive flow of Assets Under Management (AUM) moving from actively-managed funds to ETFs and index funds.

This article depicts the competitive landscape in the passive industry including market share, money flow, ETFs fees, AUM and performance. Credits to Nasdaq, Morningstar, Bloomberg and ETFStore’s President Nate Geraci.

1. Market Share Passive Funds

Vanguard holds over half of the market share for passive funds followed by BlackRock, State Street and Fidelity.

https://twitter.com/nategeraci/status/1133889512587837443/photo/1

2. Market Share Index Provider ETF

S&P DJ, MSCI and FTSE Russell hold more than half of market share in the ETF index provider competitive landscape.

https://www.nasdaq.com/article/2018-etf-2020-exchange-traded-fund-annual-report-cm1088058

3. Market Share ETF Providers

State Street’s ETF market share has been decaying while Vanguard’s has been rising. iShares is still leading the pack while all the other ETF providers have under 20% combined market share.

https://twitter.com/nategeraci/status/1144013956870234112/photo/1

4. 2018 ETF and Fund Flows by Issuer

Blackrock was the issuer with the largest inflow in passive ETFs in 2018 followed by Vanguard which held the largest inflow for index mutual funds. Fidelity displays an interesting pattern with the largest outflow in active mutual funds with corresponding large inflows in index mutual funds.

https://twitter.com/nategeraci/status/1133889515624574977/photo/1

5. ETF Fees vs. Net Flow

Firms’ relationship between ETF Fees and Flow follows a hyperbolic function. The ETFs with the top 3-year estimated net flows have the lowest net expense ratio. However, low cost does not necessarily lead to high net flows, as a hyperbolic curve would tell.

https://twitter.com/nategeraci/status/1143907007650549761/photo/1

6. ETFs are a Favorite for Financial Advisers

For the fifth year in a row, Exchange-Traded Funds (ETFs) are all the rage among financial advisers with 88 percent of financial advisers surveyed currently using or recommending ETFs with their clients — the most popular investment vehicle among 22 options, according to the latest annual survey by the Financial Planning Association® (FPA®), the Journal of Financial Planning, and the FPA Research and Practice Institute™.

Annual survey by the Financial Planning Association® (FPA®)

7. ETFs Equity Market Ownership

With the emergence of ETF industry there is a growing concern on market (in)efficiency. Ownership data from the Federal Reserve actually shows that ETFs while on the rise still only represent a small percentage of the equity market ownership. Households and Mutual Funds are the top contributors with a combined ownership of over 50%.

https://twitter.com/nategeraci/status/1139264196703653895/photo/1

8. Most Successful ETFs by Launch Year

The SPDR S&P 500 ETF was launched in 1993 and it’s the most successful ETF to date with over $225 Billions in AUM. In 2019, the most successful ETF launch so far is coming from the ESG space with the Xtrackers MSCI USA ESG Leaders Eq ETF already with over $1 Billion in AUM.

https://twitter.com/nategeraci/status/1136747090225324033/photo/1

9. Most Successful ETF Launches of 2019 so far

2019 will end as the year of ESG with the top 2 ETF launches so far coming from ESG-based strategies.

https://twitter.com/nategeraci/status/1135644208721780737/photo/1

10. ETFs YTD Total Return

Invesco Solar ETF (TAN), United States Gasoline (UGA) and ETFMG Alternative Harvest ETF (MJ) are the top performers in 2019 all with over 34% in total YTD return (as of May 27, 2019).

https://twitter.com/nategeraci/status/1133121475702083585

Data Driven Investor

from confusion to clarity, not insanity

Thársis Souza, PhD

Written by

Data Science, Finance and Alternative Data. www.souzatharsis.com www.openquants.com

Data Driven Investor

from confusion to clarity, not insanity

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