As we approach the halfway point of 2012, we are on track for yet another period of tremendous growth for the lineup of ETFs. More than a hundred new funds have begun trading already this year, and dozens of issuers continue to plan aggressive expansions of their product lineups.
While the blistering pace of expansion continues, launching new ETFs that catch on quickly with investors remains quite challenging. More than 95% of the ETFs to debut this year have not yet cracked the $100 million mark, and many of them are languishing with fewer than $10 million in assets. The most successful new ETF to launch in 2012 has been PIMCO’s Total Return ETF (BOND) by a landslide. The ETF managed by legendary bond investor Bill Gross has already gathered about $1.3 billion in assets under management, putting it well ahead of other funds such as GOVT ($380 million) and SJNK ($111 million).
The ETF industry remains incredibly top heavy, with about 25 funds accounting for half of total assets. Below, we take a look back throughout this history of the ETF industry, highlighting the most successful ETFs to debut in each year since 1993 (with a few gaps for years from which no ETFs still exist):
Last year PowerShares launched its S&P 500 Low Volatility Portfolios (SPLV), which focuses on low volatility components of the popular S&P 500 benchmark. That simple strategy has proven to be very popular with investors; SPLV is already closing in on $2 billion in assets.
The S&P 500 ETF (VOO), launched by Vanguard in 2010, focuses on tracking the large capitalization sector of the U.S. equity market. Perhaps thanks to the low expense ratio (VOO charges just six basis points) VOO has proven to be quite popular, and has raked in $4.5 billion in assets.
The Alerian MLP Index ETN (AMJ) was launched in 2009 by JP Morgan to track the performance of the energy MLP sector. By avoiding corporate income taxes, MLPs prove to be a solid source of steady income and AMJ’s $4 billion in assets prove this point.
In 2008 ProShares issued the UltraShort Barclays 20+ Year Treasury (TBT), giving a powerful tool to investors with a bearish short-term outlook on U.S. long-term treasuries. This riskier ETF has over $3.2 billion in assets.
The Total Bond Market ETF (BND) was issued by Vanguard in 2007, offering broad-based exposure to investment grade U.S. bonds. This Vanguard fund has been steadily gaining on iShares’ AGG, which is linked to the same index. BND now boasts assets of about $17.2 billion, making it larger than AGG.
Vanguard debtuted the Dividend Appreciation ETF (VIG) in 2006 to replicate the Dividend Achievers Select Index, which tracks the performance of U.S. common stocks that have a history of increasing dividends. This dividend focused ETF has provided stability to many investors’ portfolios and its popularity is apparent with nearly $11 billion in assets.
In order to capitalize on the growing popularity of emerging markets, Vanguard issued the Emerging Markets ETF (VWO) in 2005. The broad-based, low cost emerging markets ETF has become one of the largest ETFs out there is a relatively short epriod of time; VWO is now approaching $50 billion in assets.
The SPDR Gold Trust (GLD) was issued in 2004 by State Street to track the spot price of gold bullion. GLD moves in lock step with gold prices and is thus a valuable tool to add to portfolios of varying strategies. Investors’ support for this versatile ETF have boosted assets to well over $65 billion.
One of the first ETFs to offer exposure to the stock markets of emerging economies, the MSCI Emerging Markets Index Fund (EEM) was issued by iShares in 2003. Being one of the oldest and largest ETFs to date with over $32 billion in assets, EEM highlights the important role that emerging economies play in many portfolio strategies.
Since its issuance in 2002 by iShares, the iBoxx $ Investment Grade Corporate Bond Fund (LQD) has become the most popular option for investors looking to gain exposure to investment grade corporate bonds. Investors building long-term portfolios have found LQD to be a helpful building block as corporate bonds can deliver attractive yields without much added risk. This fund has $21 billion in assets.
Created to track the performance of equity markets in European, Australasian, and Far Eastern markets, the MCSI EAFE Index Fund (EFA) issued by iShares has become a cornerstone of many long-term investment strategies. EFA offers unrivaled liquidity, and with $33 billion in assets it’s obvious that investors value this ETF.
In 2000 iShares issued the S&P 500 Index Fund (IVV) to track the performance of the S&P 500. Investors value this modernized S&P ETF for long-term strategies as the fund has the ability to lend out shares unlike SPY. Nearing $29 billion in assets, this ETF is a useful investment tool in portfolios seeking exposure to mega and large cap stocks in the U.S. market.
The QQQ (QQQ) issued by Invesco PowerShares seeks to track the NASDAQ-100 index, which offers exposure to one of the world’s most widely-followed equity benchmarks. Investors have embraced QQQ as a powerful trading vehicle and the fund’s assets have grown to over $31 billion.
The Dow Jones Industrial Average ETF (DIA) issued by State Street seeks to track the Dow Jones. This ETF, composed of 30 ‘Blue Chip’ securities, has been used by investors seeking exposure to the largest and most developed companies within the U.S. equity market. Assets under management now sit around $11.2 billion.
iShares issued the MSCI Japan Index Fund (EWJ) to track a wide spread of companies within the Japanese equity market. With thin spreads, low costs, and balanced exposure this ETF has proven itself as a valuable tool for investors seeking exposure to the Japanese market. Accordingly, assets have reached $4.6 billion.
The Midcap SPDR (MDY) was issued by State Street in 1995, giving investors access to the mid cap sector of the U.S. equity market. With assets at $9.3 billion many investors have found this ETF as a useful building block for long-term, buy-and-hold portfolios.
Issued by State Street, the SPDR S&P 500 (SPY) is one of the largest and most heavily-traded ETFs to date. For those seeking to establish exposure to large cap U.S. stocks, the liquidity of SPY is unrivaled. This ETF’s popularity with active traders has pushed the assets under management to over $98 billion, an impressive feat by any standards.
Check out the graph below to see an interesting comparison of the number of ETFs issued per year and the current assets under management. As shown below, ETFs launched in 2012 account for only a sliver of total assets. As AUM goes, 2007 was the most successful year for the ETF industry; products launched during that year account for about $180 billion.
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