The exchange-traded fund (ETF) marketplace is active, competitive, and ever-growing. It's also very top-heavy; the biggest firms dominate a very large portion of total investment assets under management (AUM). For example, the top three providers in the United States – Blackrock's iShares, State Street's SPDR, and Vanguard—handle the majority of all ETF activity.
The global market isn't much more balanced. The top four firms account for more than three-quarters of available ETFs. The German-based Deutsche Bank's ETF wing, called Deutsche Asset & Wealth Management, is the fourth major player along with the big American three. Invesco's PowerShares ETF series is a distant fifth in global markets.
ETFs are still a relatively young instrument class. Each of the five largest firms bring competitive advantages to the table that make them successful.
- As of early 2020, over $3 trillion is invested in various ETFs.
- BlackRock's iShares are the largest ETF issuer in the world.
- Vanguard offers a wide array of low-cost ETFs.
- State Street Global Advisors offers the most highly traded ETF in the World, SPY, which tracks the S&P 500 index.
- Deutsche Bank is the largest non-US ETF provider.
- Invesco ETFs are based on their quantitative research and are much smaller than the other providers.
BlackRock's iShares ETFs
While there isn't much separating Vanguard and State Street in terms of total AUM, both are battling for a distant second to BlackRock and the wildly successful iShares series.
BlackRock didn't originate iShares; the series was acquired during a takeover of Barclays Global Investors in 2009. Barclays actually launched iShares way back in 1996. By 2020, iShares included more than 800 funds and $1.9 trillion in AUM.
Thanks in large part to the success of the iShares ETFs, BlackRock boasts trillions more in total investable assets—a figure larger than all but three countries and representing more than one-fifth of the size of the U.S. economy.
IShares is most renowned for building its ETFs around leading global indexes, such as Barclays Capital, the Dow Jones, Morningstar and Standard & Poor's. These funds average the highest average dividend yield of any provider.
Vanguard has passed State Street Advisors as the second-largest ETF provider in the world. Vanguard is probably the most unique and noteworthy ETF provider on this list.
Vanguard can be thought of as the Walmart of investment companies, with its "low-cost" mantra. Even though Vanguard offers some managed ETFs, this company cuts its teeth on tiny expense ratios for passively managed funds. Its FTSE Emerging Markets ETF (VWO) is especially noteworthy for its size ($49+ billion in AUM) and enormous volume.
What really makes Vanguard different is that it is owned by its own funds, meaning that its clients are also owners.
State Street Global Advisors' SPDR ETFs
Founded in 1792, State Street Global Advisors offers more than 100 ETFs. Most of these are referred to as SPDR funds. The SPDR S&P 500 ETF (SPY) is the oldest and largest such ETF, with nearly $255 billion in AUM as of early 2020. SPY is the most actively traded ETF in the world.
The SPDR series is a little different in that all funds are formulated as unit investment trusts. They tend to track larger-cap firms in developed countries.
Deutsche Bank AWM X-trackers ETFs
Deutsche Bank's X-trackers is by far the largest non-U.S. ETF provider. This series was launched in 2007 and met with immediate success, although there is the threat of serious price competition from Vanguard in European markets.
Invesco is part of Invesco Ltd. and was launched in 2003. Though much smaller than the aforementioned series of ETFs, Invesco is notable for its rules-based quantitative approach. The company calls this the Intellidex strategy, where stock is weighted for capital appreciation potential.
The Invesco lineup is dominated by one fund: the Invesco QQQ (QQQ). More than five times larger than any other Invesco ETF, QQQ is one of the most popular ETFs in the world.