A coffee table book on ETFs? I’m considering. Until then, here are some of my favorite ETF charts so far in 2019. Enjoy!
Previous “ETFs in Pictures”:
Accelerating ETF Growth
As always, we start with an updated ETF growth chart. This one is courtesy of Bloomberg’s Eric Balchunas, who observes ETFs are on pace to hit $4 trillion by the end of June. It took ETFs 18 years to hit $1 trillion, 4 years to reach $2 trillion, 2.5 years to get to $3 trillion, and – if it happens in June – less than 2 years to achieve $4 trillion!
Source: @EricBalchunas
ETFs Crushing Mutual Funds?
For all of their growth and hype, ETF assets still a fraction of mutual fund assets.
Source: Alpha Architect’s Ryan Kirlin
But a Deeper Look Tells the Real Story
While mutual funds dwarf ETFs, a long-running bull market has masked investors yanking billions of dollars out of active mutual funds. The long-term trend is not mutual funds’ friend.
Source: Investment News
Another Way to Look at It
While active mutual funds have lost market share over the past 10 years as investors have flocked to index funds and ETFs, the overall market pie has grown.
Source: ICI
Which Means Active Mutual Funds are Still Raking in the Dough…
Source: @EricBalchunas
…Despite Continued Underperformance
2018 was billed as the “year of the active manager”. Whoops. Over the long-term (think 10 or 15 years), 80%+ of active managers across all categories have underperformed their respective benchmarks.
Source: S&P Dow Jones Indices
Fees Continue Declining…
Since the year 2000, mutual fund and ETF fees combined have dropped by roughly half – the average asset weighted fee in 2000 was 0.93%; in 2018 it was 0.48%. Investors saved an estimated $5.5 billion in fees in 2018 compared to 2017.
Source: Morningstar
…In Large Part Because Investors are Seeking Out the Lowest Cost Funds
Source: Charles Schwab
Investors Want the Cheapest of the Cheap ETFs…
More than 95% of net flows in 2018 went to ETFs with expense ratios of 0.20% or less, including a growing portion to those with fees of 0.05% or less.
Source: Wall Street Journal
…Especially for the Core Building Blocks of a Portfolio
Source: JPMorgan
Nearly Three-Fourths of Total ETF Assets are in Products Charging 0.20% or Less…
Source: Nate Geraci
ETF Fee War Reignites
After a relative period of calm which led some ETF industry observers (including yours truly) to declare the fee war over, there was a frenzy of fee cuts during a two-week period earlier this year. There are now ETFs with zero and even negative fees (after fee waivers)!
Link
Fighting Over Basis Points
While the ETF fee war grabs headlines, most ETF fee cuts are only a basis point or two. Why? Because investors have already won the fee war.
Source: FactSet’s Elisabeth Kashner
Where They Stand Now
Source: Nate Geraci
ETF Trading Commissions a Battleground Too
Major brokerages continue expanding their lineup of commission-free ETFs, desperate to capture ETF-focused investors.
Source: @tpsarofagis
Fees Aren’t Everything
An ETF’s construction and underlying exposure is more important than fees. Other factors such as an ETF’s liquidity should be considered as well. 2018 provided a good example of differences in bid-ask spreads among the most popular S&P 500 ETFs.
Source: State Street
Taxes Matter Too
According to Barron’s, over the past 5 years, nearly 58% of equity mutual funds paid capital gains compared with less than 6% of equity ETFs. In 2018, a DOWN year for most assets, 6.2% of all US-listed ETFs paid a capital gain, compared to more than 60% of US mutual funds! Investors owe taxes on capital gains if these funds are held in a taxable account.
Source: @StateStreetETFs
Investors Continue Pumping Money into BlackRock’s iShares & Vanguard ETFs…
Source: Bloomberg TV
…Which is Reflected in ETF Industry Market Share
Source: Nate Geraci
ETF Terrordome – Vicious Competition Greets New ETFs & ETF Issuers
Bloomberg’s Eric Balchunas refers to the ETF industry as the Terrordome because of the brutal competition. 81% of ETFs launched in 2018 had less than $50 million in assets by the end of the year.
Source: FactSet’s Elisabeth Kashner
But Unicorns are Real…
Survival in the ETF Terrordome is tough, but not impossible. Below are the fastest ETFs to hit $1 billion – a chart also known as “Missile Command” after the classic Atari game.
Source: @JSeyff
The Future of ETFs is Bright…
Source: Bloomberg
…With Millennials Leading the Way
Source: Charles Schwab
Still More Education Needed
ETFs have democratized investing, but they haven’t democratized financial and ETF literacy. Better ETF education will help drive even greater use of ETFs.
Source: Cerulli