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ETF Provider Fees Topped $4.3B In 2012

Matt Hougan


How much did the U.S. ETF industry bring in last year from fund fees?

The answer, using very blunt math and some simplifying assumptions, is $4,258,804,274.49.

That number is riddled with errors, but it gets you in the ballpark. To calculate it, I took the assets under management of all ETFs and ETNs listed in the U.S. at the end of 2012 and multiplied them by their stated expense ratio.

This consciously overlooks a number of things, including:

  • ETF assets generally grew during 2012, and I used year-end data to calculate the fees, therefore overstating how much the industry actually earned.

  • Some ETFs launched partway through the year, but I applied the expense ratio as if it were charged for the full year, again overstating revenues.

  • Offsetting this, expense ratios generally drifted lower throughout the year. By using the year-end expense ratio, I understated the earned revenue.

  • The expense ratio is not the only source of revenue for these firms.


Nonetheless, $4.3 billion is an interesting number, and it puts the growth of the ETF industry in context. We talk a lot about how low ETF fees are, and they are. But still, this is a real industry:$4.3 billion is real money.

It’s also up since last year. A lot. Using the same simplifying methodology, ETF industry revenues from fees in 2011 were about $3.4 billion—a 26 percent increase in revenue is pretty good.

What else can we learn?

The top-12-earning ETFs make an interesting list. The iShares MSCI Emerging Markets ETF (EEM) generates the most revenue from its expense ratio of any ETF, with $323 million in annual fees. The SPDR Gold Shares ETF (GLD) nearly matches it, despite a lower expense ratio, as its larger asset size helps drive nearly $290 million in fees.

Going down the list, there are a few surprises, and one that drives me crazy.

Top-Grossing ETFs As Of 12/31/12 (Based on Expense Ratio)




AUM ($mm)

Revenue ($mm)

iShares MSCI Emerging Markets


0.67% $48,184 $322.83



0.40% $72,239 $288.96



0.34% $38,814 $131.97

Vanguard MSCI Emerging Markets


0.20% $59,097 $118.19

SPDR S'P 500


0.0945% $123,000 $116.24

iShares iBoxx $ High Yield Corporate Bond


0.50% $15,972 $79.86

iShares FTSE China 25


0.74% $8,495 $62.86

Alerian MLP


1.40% $4,449 $62.29

PowerShares DB Commodity Tracking


0.93% $6,608 $61.45

PowerShares QQQ


0.20% $30,417 $60.83

iShares MSCI Brazil


0.61% $9,303 $56.75

iShares S'P U.S. Preferred Stock


0.48% $10,761 $51.65


For starters, look at Vanguard. Vanguard may be an ultra-low-cost provider, and getting broad-based emerging markets exposure for 0.20 percent is an amazing deal, but VWO is pulling down $118 million-plus in fees each year. That’s not bad for a co-op!

The iShares Preferred Stock ETF (PFF) shocks me too:When did that become a $10 billion-plus fund earning $50 million-plus per year?

On the “drive-me-crazy” side, you have the iShares FTSE China 25 ETF (FXI). The fund is generating more than $60 million a year in fees thanks to its high expense ratio, despite the fact that there are cheaper products offering better exposure to China. There’s even one from iShares itself:the iShares MSCI China ETF (MCHI), which charges just 0.60 percent in annual fees. Did I mention that MCHI outperformed FXI by almost 5 percentage points last year? Investors could have saved $11 million in fees, and gotten better performance to boot!

Of course, not all ETFs are making their issuers money. There are 477 ETFs generating less than $100,000 in revenues from fees each year. Those aren’t buying anyone any yachts.


Which ETF Company Brought In The Most?

It should surprise no one that iShares vacuums up the lion’s share of fees, pulling in $1.8 billion in fees (or about 44 percent of the total). That’s roughly in line with its share of total assets, currently at 41 percent.

SSgA is next, with $773 million, followed by Vanguard, PowerShares and ProShares.

ProShares is noteworthy, of course, because it has relatively low assets:just $21 billion, or 1.6 percent of total industry assets. By comparison, it pulls in more than 5 percent of total industry fees. That’s what charging 0.95 percent for most of your products will do for you.

Together, the top 10 firms earn 92.3 percent of the total revenues generated by fund fees.

Top-Grossing ETF Companies (Based on Expense Ratio)


Revenues from Expense Ratio* ($mm)











Van Eck








First Trust

*These are rough estimates. No effort has been made to account for the fact that many products are jointly developed and sold, with revenue split between two firms, or that some product revenues must be dedicated to marketing and don’t accrue to the bottom line of companies. These factors will overstate the revenues to firms like PowerShares, which get full credit for funds like the QQQ’s and the PowerShares DB products … when QQQ revenue must be spent on marketing activity, and PowerShares is only the marketing agent for the commodity products. The actual assignation of revenue would be exceedingly difficult, so I’ve made simple assumptions to prove a general point.

I haven’t posted it here, but companies on the bottom of the list are interesting too. Schwab, for instance, has been very impressive in its entry into the ETF space. It’s come into a crowded market with 15 well-thought-out core ETFs, and has captured more than $8.5 billion in assets.

Thanks to its ultra-low fees, of course, it only earns $6.5 million in fees from the products. I’m guessing they’re making up for it in other ways.


This kind of analysis is fun, but it’s important to put it into context:$4.3 billion in annual fees sounds like a lot, and it is. But ETFs remain the best deal going by a long shot.

Consider this:If ETFs didn’t exist, most of the money invested in these ETFs would be invested in pricey mutual funds instead.

Right now, the asset-weighted average expense ratio in the mutual fund world is 0.72 percent, compared with 0.31 percent for ETFs. If you took all the money invested in ETFs and plowed it back into funds, investors would be paying an additional $6.7 billion in fees.

That is money that we—ETF investors—can take to the bank.


At the time this article was written, the author held no positions in any of the securiries mentioned. Contact Matt Hougan at mhougan@indexuniverse.com.



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