Although Barclays Global Investors runs $301 billion in exchange-traded fund money through 137 funds— commanding a 60% share of the $500 billion ETF market—Vanguard and State Street are launching new products and marketing campaigns to catch up, Reuters reports.
For its part, with $102 billion in assets and 59 ETFs, State Street has a 20% market share and, with $30 billion and 32 ETFs, Vanguard a 6% market share. But they are the second- and third-runners up in the ETF market in the U.S. and believe they can close in on Barclays.
“Those two are really the two other major players, and they are both getting much more serious and becoming much stronger competitors,” said Jim Wiandt, publisher of IndexUniverse.com. “I definitely think there’s a much stronger attack coming. This is definitely the most serious challenge BGI has faced since they sort of established their hegemony” with the first ETF, the SPDR, based on the S&P 500 Index, in 1993.
As an indication of a shift in the tide, Vanguard attracted $6.3 billion in its ETFs in the first five months of this year, compared to $8.6 billion throughout all of 2006. It also charges much less than Barclays. For example, Morningstar calculates that Vanguard charges an average of 18 basis points for its ETFs, compared to 43 basis points for Barclays’ ETFs.
Meanwhile, other ETF providers, many of whom have carved out small niches of major indexes, or are weighting them differently to create so-called “enhanced” indexes, are also making strides. PowerShares Capital Management now has $14 billion in ETF assets, or a 2.8% market share, and WisdomTree Investments has $4 billion, or a 0.8% market share.