At the end of August, the U.S. exchange traded products industry, including ETFs and exchange traded notes (ETNs) was home to nearly 1,800 products trading across three exchanges with over $2 trillion in combined assets under management.
However, it is not just assets and products that are growing by leaps and bounds. The number of companies getting into the ETF business is also growing in significant fashion.
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"Nineteen new ETF/ETP providers have entered the ETF industry in the United States during the first 9 months of 2015, beating the prior full year records of 15 new providers entering the ETF industry in both 2014 and 2009,"according to ETFGI, a London-based ETF research firm.
A noteworthy trait found among many new ETF providers is superior brand recognition and/or the backing of "star power," which has enabled some of 2015's rookie ETFs to be successful right of the gates. For example, the SPDR DoubleLine Total Return Tactical ETF (NYSE:TOTL) is issued by State Street Global Advisors in partnership with bond king Jeff Gundlach's DoubleLine Capital. Investors know and respect Gundlach and that has helped TOTL become 2015's most successful new ETF with over $1.22 billion in assets.
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With more advisors and investors flocking to ETFs and that growth expected to continue, new players are entering the ETF business at the right time.
"The 2015 ETF Investor Study published last week by Charles Schwab revealed that investors already using ETFs are now allocating 21% of their total portfolios to ETFs, up from 16% in 2012. Moreover, these investors expect that number to jump to 25% percent in the next five years. Meanwhile one third of respondents said ETFs will form the core of their investment portfolios in the future The 2015 ETF Investor Study published last week by Charles Schwab revealed that investors already using ETFs are now allocating 21% of their total portfolios to ETFs, up from 16% in 2012. Moreover, these investors expect that number to jump to 25% percent in the next five years. Meanwhile one third of respondents said ETFs will form the core of their investment portfolios in the future," said S&P Capital IQ in a recent research note.
Speaking of star power, O'Shares Investments, the ETF issuer started by Kevin O'Leary of "Shark Tank,"has issued six ETFs in less than 90 days with the O'Shares FTSE US Quality Dividend ETF (NYSE:OUSA) among those finding rapid success.
"Collectively the 19 new providers have launched a total of 37 products, accounting for $1.1 billion in assets as of the Sept 29. The majority, or 21, of these new launches follow Smart Beta strategies, followed by Active with seven. The record number of new providers entering the ETF industry in the U.S. industry demonstrates the trend we previously identified that most asset managers feel they need to have a presence in the ETF industry," notes ETFGI.
Goldman Sachs Group Inc. (NYSE:GS) and John Hancock are among the recent entrants with big brand recognition that have recently entered the burgeoning strategic beta space. The Goldman Sachs ActiveBeta Emerging Markets Equity ETF (NYSE:GEM) has already surpassed $178 million in assets under management. For its part, Boston-based John Hancock recently introduced six strategic beta ETFs, including broad market and sector funds. Again, the timing appears to be good as advisors continue toembrace strategic beta offerings.
Hancock's new ETFs favor "companies based on market capitalization, price-to-book and operating profit-book value. While there is a large-cap and mid-cap offering that have diversification benefits, we are intrigued that there four sector specific products," said S&P Capital IQ.
According to FTSE Russells first U.S. retail financial advisor market survey - Smart Beta: 2015 survey findings from U.S. financial advisors - 68 percent of financial advisors polled are using smart beta ETFs and 70 percent are using multiple strategic beta approaches.
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