We're currently watching the "great rotation" from stocks to bonds as investors move funds from one asset class to another. Meanwhile, ETF leader Blackstone says it sees a secular shift to exchange-traded funds and top asset managers are engaged in a fee war in a race to the bottom on low ETF fees.
So what's at stake in this industry? Nothing less than $1 trillion in assets, notoriety, and a position as a leader in one of the fastest growing products on Wall Street. Let's take a look at the 8 largest ETFs on earth, their returns and benefits to portfolios, and why investors prefer these ETFs to their alternatives.
Largest ETFs by Assets
Here are the eight largest ETFs by assets - funds that have "made it" by allocating billions of dollars to investors' favorite investments:
- SPDR S&P 500 ETF Trust (SPY) - No surprises here! The S&P 500 tracker is the most successful fund having just past its 20th birthday. The oldest ETF on the market, the S&P 500 ETF Trust is the largest and most successful fund with $121 billion in assets under management. This fund is the most liquid and actively traded ETF, and in it investors have stored nearly one tenth of all assets invested in ETFs. With an annual expense ratio of .095%, this fund proves that success brings lower expenses.
- SPDR Gold Shares (GLD) - This fund has gone from zero to hero as it gives investors and easy, secure, and liquid way to get exposure to the golden yellow metal. The SPDR Gold Shares ETF is priced at one-tenth of the price of an ounce of gold and has more than $72 billion in assets. Backed by gold and gold futures, this fund is a popular topic of conversation after returning 86% in the last five years. With an annual expense ratio of .4%, investors see the value in holding GLD over premium priced physical metals. (See our view on gold miners vs. physical gold.)
- Vanguard FTSE Emerging Markets ETF (VWO) - Vanguard makes it into the number 3 position with VWO but it might not be here for long. The third-largest ETF is in a fee war with the fourth largest fund below, which led Vanguard to ditch a well known emerging markets MSCI index for a cheaper FTSE tracker. The fund costs just .20% to hold after slicing fees as part of a bitter fee war. With nearly $62 billion in assets under management, this fund makes up nearly 5% of ETF assets by itself.
- iShares MSCI Emerging Markets Index Fund (EEM) - Following right behind Vanguard, this iShares ETF has $46 billion in assets under management thanks to its low .67% annual expense and excellent tracking of the well known MSCI emerging market index. Known as the fund for risk-on, risk-off trading, the EEM ETF is a favorite for quick and dirty global emerging market exposure.
- iShares MSCI EAFE Index Fund (EFA) - This global fund is a favorite for investors looking for exposure to the developed corners of the globe. Invested in Europe, Australia, Asia, and the Far East, this fund exposes investors to a different blend of risks and rewards not found in other funds. An annual expense ratio of .34% keeps investors coming back for long-term buy and hold exposure, too. Nearly $40 billion in assets make this fund a behemoth.
- Powershares QQQ Trust (QQQ) - This fund set the ETF world on fire when it debuted on top of an internet bubble in 1999. Known simply as "the Qs," this fund tracks the Nasdaq 100 index with perfection. Sporting a .20% annual expense ratio and $33 billion in assets under management, this fund is a titan on Wall Street.
- iShares Core S&P 500 ETF (IVV) - Everyone talks about SPY, but this fund offers the same exposure to S&P 500 names with a fee two and a half basis points lower than its competitor at .07% per year. Need broad market exposure and faithful tracking of the S&P 500 index? This fund is perfect for you - and it's the least expensive option on the market. Some $32 billion in assets put this fund at number seven in the largest ETFs by assets.
- iShares iBoxx Investment Grade Corporate Bond Fund (LQD) - It isn't until number eight that we encounter the first bond fund. Ishares' fund offers exposure to the most liquid investment grade bonds with extreme diversification. The fund holds 600 different investment grade bonds, with ratings spanning triple-A to BBB and average maturities coming in at 12 years. This is the go-to bond fund for easy liquid bond exposure. A low .15% expense ratio and in-demand portfolio make this fund the eighth largest with $25 billion in assets.
Disclosure: No position in any tickers mentioned here.