- What are ETF Issuers?
- Top 5 ETF Issuers by Size
- Summary of ETF Issuer Growth
- Top 5 ETF Issuers by Revenue
- ETF Issuer Summary Table
What are ETF issuers?
ETF issuers are the businesses that build and ‘issue’ the ETFs to the public via the ASX. There are over 20 ETF providers in the Australian market supplying over 190 ETFs for investors to use.
Top 5 ETF issuers by size
Vanguard and iShares continue to dominate the ETF market in Australia. Combined they account for 56% of all money invested in ETFs. This year BetaShares knocked off SPDR to become Australia’s 3rd largest ETF issuer. These ‘Top 4’ account for 84% of the Australian market.
|Issuer||FUM ($b)||Annual change in FUM ($b)||Market Share (%)|
Summary of ETF issuer growth
BetaShares, iShares, Vanguard and VanEck were the only providers to increase their FUM by more than $1b. These 3 issue 131 out of the 192 available ETFs on the ASX.
Vanguard dominates in both Australian shares and Global shares ETFs. Their annual change in FUM was double the next biggest ETF issuer.
Most of this is attributable to both flows and market performance in their 3 broad share ETFs – Vanguard Australian Shares ETF (VAS), Vanguard MSCI Index International Share ETF (VGS) and Vanguard US Total Market Shares Index ETF (VTS).
VAS was the ETF with the highest annual flows with more than $720m. We continue to use VAS as our preferred Australian Share ETF due to it tracking the broadest index (S&P ASX/300 not S&P ASX/200), large size and low cost.
Find out more by reading our Australian Share ETF review. Vanguard’s ability to scale and drive prices lower to build brand loyalty have positioned them as the top ETF issuer in the Australian market by FUM size.
iShares is the second biggest ETF provider after Vanguard. iShares have 34 products across all asset classes and a reputable global brand (iShares are a subsidiary of Blackrock, the largest fund manager in the world).
iShares saw large inflows into their Cash and Fixed Income product suite through iShares Core Cash ETF (BILL) and iShares Core Composite Bond ETF (IAF).
iShares has seen a lot of investor interest in their iShares Edge MSCI World Multifactor ETF (WDMF). Market factors like ‘value’ have seen significant underperformance over the last 10 years so those looking to use factors in their portfolios are diversifying across multiple factors.
Click here to find out more about factor investing and Stockspot’s view on it. We previously discussed why Stockspot prefers an all factor approach (i.e. owning the entire market). BILL, IAF and WDMF were all among the top 10 ETF by flows over the year.
Meanwhile IOO and IVV continue to dominate in size, cementing their spots in top 5 ETF by FUM. Stockspot uses IOO as it’s preferred global share ETF. You can find out why we picked this ETF by seeing our best global share ETF review.
A quarter of all new ETF money was invested in BetaShares’ ever expanding product suite. They were the only ETF issuer to have more flows than last year.
This was largely driven by the launch of the BetaShares Australia 200 ETF (A200) which has $545 in FUM. Of this figure, flows accounted for $524m as there has been a rotation out of some higher-cost Australian Share ETFs (particularly STW and IOZ) into A200. We have reviewed the A200 fund alongside the other popular Australian share ETFs here.
Betashares launched numerous products in the Global shares and Fixed Income space gaining a lot of traction over the past year including BetaShares Asia Technology Tigers ETF (ASIA), BetaShares Global Robotics and Artificial Intelligence ETF (RBTZ), BetaShares Global Income Leaders ETF (INCM), BetaShares Australian Investment Grade Corporate Bond ETF (CRED), and BetaShares Legg Mason Australian Bond Fund (managed fund) (BNDS).
SPDR had a relatively low growth rate of 7% and struggled to keep up with competitive pressures on fees over the past few years. Australia’s largest ETF by FUM, the SPDR S&P/ASX 200 (STW) saw the largest outflows out of all ETFs. $221m of investor money left the ETF, most likely headed to its cheaper Betashares rival A200.
STW still remains the largest ETF with $3.6b in AUM but we expect VAS to overtake the lead. SPDR accounted for 4% of the 1 year flows last year, but because of STW’s outflows, it was the only issuer to have net outflows (more money going out) this year.
SPDR hasn’t launched any new ETFs or changed any fees for three years. This suggests their focus on the Australian ETF market has declined relative to their overseas, institutional and active management businesses.
ETF Securities had decent growth of 22% in FUM. They have tapped into investors appetite for global thematic ETFs by adding to their ‘Futures Present Range’ launching the ETFS S&P Biotech ETF (CURE) and ETFS Battery Tech & Lithium ETF (ACDC) to the market.
Their ROBO, GOLD and high dividend yielding strategy (ZYAU) all contributed to the inflows over the last year. GOLD has $656m in FUM (growing 13% from last year) and is our preferred Gold ETF, as we continue to believe Gold is an excellent portfolio risk reduction tool.
VanEck Vectors increased FUM by 61% over the year, exploding to manage $2.6b across their 18 ETFs. Majority of this increase was due to new money (~$757m) into their ETFs. Almost a third of this new money was poured into their Australian Share ETF – the VanEck Vectors Australian Equal Weight ETF (MVW).
The theme of quality and defense also justified the increased flows into their Fixed Income Products suite like the VanEck Vectors Australian Floating Rate ETF (FLOT) and VanEck Vectors Australian Corporate Bond Plus ETF (PLUS).
Australian investors have been particularly keen to get exposure to China due to strong growth in the Chinese economy, easing trade wars, and the MSCI inclusion of China A shares in its emerging market index.
VanEck have benefited from this through their 2 China ETFs – VanEck Vectors China New Economy ETF (CNEW) and VanEck Vectors ChinaAMC CSI 300 ETF (CETF).
Across the active exchange traded managed funds (ETMFs), Magellan and Platinum continue to grow. There were 7 new active strategies launched by Antipodes, Fidelity, WCM, InvestSMART, Einvest, Ardea and Legg Mason (through BetaShares).
We expect more active strategies to come to market over the next few years however lackluster performance may limit their ability to grow. In our review of Global share market ETFs we discovered that most underperform their indexed counterparts.
Russell and UBS continue to remain smaller players in the ETF market and potentially less of a focus for these businesses.
Top 5 Issuers by Revenue
We thought it would be interesting to examine just how much money these ETF Issuers make. We took the average weighted cost of the ETFs in each respective issuer’s product suite and multiplied it by their total FUM to get an annual revenue estimate.
ETF Issuers made an annual revenue of over $150m from their management fees, with the top 5 revenue making providers accounting for over 80% of the total revenue pool.
|Issuer||FUM||Weighted Avg MER (p.a) in issuer’s ETF range||Annual Revenue|
iShares is the biggest revenue earner out of the ETF issuers, making a whopping annual revenue of $33.6m.
Interestingly, BetaShares’ suite of smart beta and higher cost products means the issuer sits in 2nd place with $28.5m in annual revenue. Even though they manage less than half of Vanguard’s FUM, they make more money because their weighted average ETF cost is almost triple Vanguard’s.
Incredibly, even though Magellan only has 3 ETFs in its range, they earn $21.9m annually from their listed products due to their higher active fund fees of 1.30% per year.
We have previously compared the performance of the flagship Magellan fund to other global ETFs. SPDR rounds up the top 5 annual revenue makers with $15.7b across their 16 products.
ETFs are saving Australian’s over $300m per year in fees compared to active fund managers who typically charge 1% p.a. By our estimation in 2022, ETFs will have saved Australians $660m in fees.
Sadly many advisers still recommend high cost active investing strategies despite the overwhelming evidence that lower cost index ETFs are in the best interest of clients.
ETF Issuer Summary Table
|Issuer||# Products||FUM ($m) Mar’19||Annual change in FUM ($m)||Annual change in FUM %|
|Montgomery Investment Management||1||96||+25||34%|
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