A Play On The Growing ETF Industry
At the end of March, exchange traded products listed around the world — including exchange traded funds — had a combined $4.919 trillion in assets under management, a number that is expected to continue growing in the coming years.
The ETF Industry Exposure & Financial Services ETF (NYSE: TETF), which recently marked its first anniversary, is proving that investing in ETF industry growth is not only viable, but rewarding as well. Over the past 12 months, TETF is up about 33 percent compared to a gain of 16.7 percent for the Financial Select Sector SPDR (NYSE: XLF), the largest financial services ETF.
What Happened
TETF tracks the Toroso ETF Industry Index. The benchmark measures and monitors the performance of public companies that generate revenue from the ETF ecosystem, according to Toroso Asset Management. Its constituents include fund sponsors, index and data companies, trading and custody platforms, liquidity providers, and exchanges, the firm said.
TETF holds 43 stocks. At the end of the first quarter, the ETF's top 10 holdings consisted of five ETF issuers as well as several index providers and exchange operators. Marquee names in TETF include Invesco Ltd. (NYSE: IVZ), the parent company of PowerShares; WisdomTree Investments Inc. (NASDAQ: WETF) and BlackRock Inc. (NYSE: BLK).
Why It's Important
Data confirm the ETF industry is growing at an impressive rate. For the 10 years ending March 31, 2018, the industry grew at a compound annual growth rate of 18.9 percent, according to ETFGI.
By some estimates, global ETF assets under management could top $7 trillion on a combined basis by 2021.
“In 2017, the U.S. ETF industry alone saw record-setting inflows of more than $476 billion to end the year north of $3.4 trillion in total industry assets,” according to Toroso.
The U.S. is the world's largest ETF market.
What's Next
TETF features companies that are deemed as direct beneficiaries of the ETF industry, those that derive indirect financial benefit from the industry, moderate industry participants and minor or new industry participants.
Bottom line: investors who want exposure to ETF industry growth without having to stock pick to that effect can turn to TETF, which is already proving to be a superior bet on the ETF boom compared to traditional financial services ETFs.
Related Links:
An ETF For Rising Oil Prices
A Global Real Estate ETF
Todd Shriber owns shares of XLF.
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