The ETF battle heats up…

By: ispeculatornew
Date posted: 12.09.2009 (5:00 am) | Write a Comment  (2 Comments)

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ishares_logo_2It certainly gives me the impression that a few ETF companies are feeling the heat. They need to gather as much assets as possible because as true as it is that there are new ETF’s being opened every day, there are also ones that are closing almost as frequently. The name of the game is very simple of course, gather assets. Those assets make it possible to get more revenues, to decrease fees and advertise its lower fees (which brings in more assets, etc, etc). It’s a simple game isn’t it?

Too many similar ETF’s?

It now almost seems like companies are now entered in a race. And that is understandable. How many ETF’s do we need to track the S&P500? Maybe having 3 or 4 might be good to increase competition. But there are many more right now and it is difficult to imagine them all surviving. For that reason, even leader IShares (now owned by Blackrock) is being very agressive through tv ads, magazine ads, sponsoring sports events and even through its own website, Youtube channel and much more.

Is Ishares or Vanguard the next Altavista/Lycos???

All of these companies know that it is still early in the game but it is also a crucial time for all of these companies. Remember how Altavista and Lycos were the early leaders in the search engine race but were then crushed by Google? I personally don’t think that will happen with Ishares and Vanguard because ETF’s that track indexes such as the S&P500 are fairly simple and cannot be improved that much apart from diminishing fees. That is a fact; ETF’s that track equity indexes are becomming commodities and like other commodities, prices are king and rarely is there enough space for 10 similar or identical products…  It is all about becomming a successful ETF.

But every day new ETF’s pop up that do not track clear indexes. They either track more broad indexes or they are even active. I will be writing about active ETF’s (alpha) next week  but I think that most ETF companies will eventually be launching those. And being seen as a leader in ETF’s will be a major step to help get those ETF’s started.  How bad do they want it? US fund management company Vanguard (#2 in the US) apparently made a $5 bln offer for Ishares but Blackrock came out with an even better offer, making the purchase for an incredible $13.5 bln!

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2 Comments

  1. […] The ETF battle heats up by Intelligent […]

  2. Comment by John — March 25, 2010 @ 1:42 pm

    How are the alpha ETFs doing? Thanks.

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