A Closer Look at the Four Largest ETF Firms

ETF Trends

In the United States there are about 40 exchange traded fund providers contributing to the industry. A look at the top four providers will give investors insight into their choices, as they account for about 87% of the ETF assets under management in the U.S.

“We believe some of the other providers offer a number of compelling equity products that stand out, in our opinion, for their low expenses (Schwab), high dividends (WisdomTree), or exposure to single-countries (First Trust and Market Vectors). But we think the four largest asset managers have the scale and strong investor awareness to warrant a closer look into how the ETFs they provide stack up in our independent research,” S&P Capital wrote in a recent note. [ETFs: People Fear What They Don't Understand]

iShares comes in first as the top provider, based on number of ETFs provided (216), and assets under management. The subset of BlackRock accounts for 40% of total U.S. ETF assets under management. The provider also comes in first out of the four based on the average dividend yield their ETFs give back. Based on expense ratio, iShares takes third place. [ETFs Performed Well in Stressed Market: iShares]

The provider is a premier sponsor of geographically diverse funds, with half of their offering based on overseas markets. This quality has allowed the average dividend yield to be higher for the provider, but has increased risk and volatility as a whole.

State Street Global Advisors takes second for total assets under management, accounting for 23% of the U.S. ETF market as of June 2013. The provider comes in second for average dividend yield and average expense ratio.

SSgA stands out for diversified holdings such as the SPDR Russell 1000 Low Volatility (LGLV) or sector-themed funds such as the Health Care Select Sector SPDR (XLV) , from the famous family of Spiders.

Vanguard is the low-cost provider, and comes in third place for overall U.S. ETF market share at 19%. The  providers offers the lowest number of funds, but comes in first for lowest average expense ratio. Also, Vanguard has launched the most ETFs over the past three year period.

Vanguard also has the strongest presence in the U.S.domestic equity ETF sector, with 18 equity based ETFs trading under three years old. Popular funds include the Vanguard 500 Index (VOO) and the Vanguard Emerging Markets Index (VWO) which recently went under index changes. [U.S. ETFs Attract $53 Billion in 2013]

PowerShares takes second place for total number of ETFs provided, fourth place for average expense ratio and fourth place for average dividend yield. The Invesco ETF arm accounts for 5% of overall ETF market share. PowerShares has launched about 20 ETFs over the past 3 years, and offers over 100 ETFs in total. [ETF Industry Outlook for 2013]

PowerShares focuses in on alternative indexing methods, which has helped garner investor interest in recent years along with their exposure to thematic indices. The PowerShares Dynamic Large-Cap Value Portfolio (PWV) and the PowerShares S&P 500 High Dividend Portfolio (SPHD) are both rated “Overweight” by S&P.

Tisha Guerrero contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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