ETF Overload: How Much of It Will Stick?

By Jim Wiandt

There are so many new products hitting the market it's making my head spin. How much of it will stick?

This week would be a great time for an issuer to sneak out an ETF closing, outsized distribution or some other negative story, with everything going on. Look at the news these days, there are some BIG stories. You would hardly have thought there were that many big stories left for the year, and it has all hit the market in the last WEEK.

The first ETFs of ETFs, Small Emerging, NETs active internationally, a money market, GLD options...that's a LOT for a week.

And I'll tell you, I'm making the rounds right now in New York, and you ain't seen nothing yet. The pipeline is chock full of new ETFs and ETNs, some of it interesting, much of it potentially a tough sell in a market that has really filled out and gotten more competitive .

First thing, Matt, is I'd love to see that new league table with assets by product issuer. What is ProShares at now, for example? I've got the data just as of end of Q1 and it was over $16 billion. I know Van Eck is at $6.5 billion (and was $5 billion as of end of Q1). I'll bet Rydex and all the big guys are up from early this year too.

With the market picking up again and the flows continuing to come in, some of the fund families are really starting to push up the assets. To me the biggest of these stories is probably WisdomTree (WDST.PK), which seemed like it had been sitting at around $4 billion (though not dropping) for a long time. They're right on the brink of cracking $5 billion. And that feels to me like a psychological barrier that could give them some momentum.

They're very different than most of the rest of the smaller product issuers out there, and have a very coherent set of products built on a philosophy, as opposed to just aiming at pent up demand (which is where much of the product development has gone once you dip below the Big 5 of iShares, SSgA, Vanguard, PowerShares and ProShares).

Matt Hougan does run weekly fund flows reports, but those just cover funds and not issuers.

The last data I can find by family, is what I put together for my ETFR cover story that will be coming out in the June issue. It actually looked at revenues (but includes assets). I'll leave the revenue numbers in for interest. Here's where we were as of 3/31/2008:

Source: American Stock Exchange, Morningstar. Data as of 3/31/2008

I bet if we bring these up to date, the total is over $600 billion again, though SPY (SPY) and to some degree a few of the other big funds are always the wild card there in terms of creation/redemption activity.

Comments

[karchad]

The original idea of ETF's was for us average Joe's to invest in the indices, so we didn't have to mess with options and futures. Also, expenses were low. Now, with all these specialty ETF's, it's like mutual funds, if ya don't know what you're doing, you can lose your shirt. And these specialty ones are charging increasing expense fees.
I'm going to stick with the tried and true ones that follow the indices.