What's New at FUSE

What's New at FUSE

——FUSE Blog——
October 16, 2020
Does Size Matter? Number of ETFs Offered Is a Factor Driving Inflows

Since 2016, larger firms that manage more than $250 billion of ETF assets have controlled more than 80% of total ETF market share. However, market share has been on the decline for numerous factors. One of the main reasons is due the number of ETFs offered by a firm. Tier 1 firms (manage 79 or more ETFs) have driven at least 75% of annual net inflows since 2009. Since 2018, Tier 2 firms (manage 10-78) have experienced a significant decrease in the share of annual net flows. Meanwhile, Tier 3 (manage 3-9) have witnessed a solid uptick.

Based on our research, outflows only occurred among the top three tiers when a firm decreased the number of ETFs offered while outflows occurred for the bottom two tiers regardless of change in the number of ETFs. This especially impacts Tier 2 firms. Managers like WisdomTree or Mainstay, early entrants into the ETF space, have not garnered scale due to lack of brand awareness and market differentiation. For example, successful Tier 2 firms have developed some of the lowest cost offerings such well-known firms like Fidelity and JPMorgan while others like Global X or Innovator ETFs have found a niche for their unique offerings. Tier 3 is making up ground at the expense of firms like WisdomTree and Mainstay by largely being brand name asset managers, such as BNY Mellon and PGIM, that recently migrating into the ETF space.

Sources: Morningstar & FUSE Research

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