- What are ETF issuers?
- Who are the biggest ETF issuers?
- Which issuers are growing the fastest?
- Which issuer earns the most money?
- 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 200 ETFs for investors to use. Our job is to pick the best products on the market, which is why we adopt a best of breed approach to recommend ETFs to our clients from a range of issuers.
At Stockspot, we choose the best ETFs from the ETF issuers in Australia to create a high-performing ETF portfolio.
Who are the biggest ETF issuers?
In 2021, Vanguard and iShares continue to dominate the ETF market in Australia with the largest funds under management (FUM). BetaShares has consistently been gaining traction over the last few years after taking the third spot from SPDR in 2019. Combined, the top three issuers account for 63% of all money invested in ETFs.
We saw two issuers leave the ETF market in 2020 (both Pinnacle and UBS delisted their ETFs), but also noticed the rise of more active managers (such as Munro Partners and Loftus Peak) looking to package their funds as an ETF solution given the tax and liquidity advantages. Magellan and Hyperion have led the charge in this area, and now have $14.8b and $1b in FUM respectively.
All ETF issuers have had the market share shrink by the Magellan conversion, which could see the rise of active ETFs as a theme to watch over the next few years.
|Top 5 Issuers||FUM ($B) Mar’21||Annual Change in FUM ($B) from Mar’20|
Which issuers are growing the fastest?
The non-major ETF issuers (i.e. those outside of Vanguard, iShares, BetaShares, SPDR, VanEck, ETF Securities and Russell) account for 4% of the Australian ETF market, up from 1.6% three years ago.
However, it’s likely we’ll see other ETF issuers gain market share. Additionally, as mentioned above, there will also be more active managers who are increasingly turning to ETFs as a way to structure their investment products.
ASIC has also created a favourable environment for active managers, by allowing them to hide their portfolio holdings (delaying disclosure to a quarterly basis instead of daily) and without the need to have an external market maker.Issuers who have more than $500m in FUM were included to reduce the impact of outliers due to a low size base.
Excluding Magellan (who increased their assets by almost 6x), ActiveX grew their assets the most by an incredible 229% in 2021. This is attributable to it’s sole actively managed bond fund – the ActiveX Ardea Real Outcome Bond Fund (Managed Fund) (ASX: XARO).
In terms of the major players, VanEck was another standout, increasing their size by 91% over the last 12 months.
After launching seven new products (and likely a couple more to come in 2021), they’re trying to offer exposure to popular trends or themes (such as value stocks, healthcare, clean energy and high dividend shares). Most of VanEck’s increase came from their quality focused ETF (QUAL) which took in $635m over the last 12 months.
Vanguard is still the dominant ETF issuer in Australia, after seeing an increase of $10.5b (60% year on year growth).
The majority of this was driven by money pouring into the Vanguard Australian Shares Index ETF (ASX: VAS), which is the largest ETF in Australia. VAS took in over $1.8b over the year.
However, Vanguard’s share of netflows decreased from 38% last year to 28% this year. This could be because their decision to stay away from thematic ETFs may have impacted their appeal for certain investors.
BetaShares grew their assets by 69% over the past 12 months, and now manages $15.8b of Australian ETF money. Their consistent release of new products, marketing prowess, as well as strong performance and flows for their U.S. and Asian technology ETFs, has helped deliver another phenomenal year in accumulating asset size. They also took in nearly the same net flows as Vanguard (almost $6 billion).
Which issuer earns the most money?
Australian ETF issuers make a lot of money, and we wanted to find out just how much. We took the cost of each of the issuer’s underlying ETFs in their product suite and multiplied this by the total respective FUM in each ETF to get an annual revenue estimate.
ETF issuers made an annual revenue of $464m from their management fees, with the top five revenue-making providers accounting for 86% of the total revenue pool. Magellan is the top earner, thanks to their expensive fee of over 1.3%. They manage close to $15 billion. BetaShares comes in second place, earning $74.4m. Even though BetaShares has just over half of Vanguard’s FUM, they make more money because their weighted average ETF cost (0.48%) is almost triple Vanguard’s.
Despite the large revenue that ETF issuers make, ETFs have still saved Australians half a billion dollars in fees had they been in actively managed funds.
Top 10 ETF Issuers by Revenue
|Issuer||Revenue ($m)||Weighted Avg Fee||# of Products|
ETF Issuer Summary Table
|Issuer||FUM ($m) Mar’20||FUM ($m) Mar’21||Annual change in FUM ($m)||Annual change in FUM (%)|
|Montgomery Investment Management||$79.2||$116.5||$37.3||47%|