In 1993, a U.S. investor had one ETF to choose from; SPY. In early 2017, that number has grown to nearly 2,000 options ranging across asset classes. While product development teams have been quite busy for decades, they really ramped things up over the last 5 or so years. Of the nearly 2,000 ETFs available currently, about half of those have come to market in 2011 or later. The table below breaks down the number of ETFs by launch year. 2015 and 2016 were particularly busy years accounting for 25% of all U.S listed ETFs
The asset breakdown by year tells a different story. Nearly 77% of the assets are sitting in products launched in 2007 or prior. The largest single portion of assets ($400B) are sitting in products that launched in the year 2000.
While competition heated up in 2016, we can best classify 2016 as the year of the fee cut. ETF sponsors like iShares, Vanguard, Schwab, and Fidelity all slashed fees, making the ETF arena that much more competitive. While the true cost of ownership for an ETF extends beyond just its expense ratio (tracking, bid/ask spreads, etc), we can see the lower cost ETFs are skewed towards the ETF veterans, who have the luxury of more assets.
To Launch or not to launch?
ETF sponsors, both incumbent and new entrants, are vigorously analyzing trends to justify the bringing a new product to market. The threshold level to measure success for an ETF can be debated, but I broke down the industry into some key buckets.
Entrance into the “Billion-Dollar Club” is a luxury enjoyed by just over 300 ETFs. For 11 of those elite, they opened up shop in 2014 or later. An encouraging sign is that while although many ETFs are new to the market and have not left much runway behind them, over 1,200 products have reached the $30 million mark.
Source: Bloomberg, Morningstar. Excludes ETFs that have closed.