700 ETFs And Counting – A Birdseye View

Our ETF / ETN database powers
the software on this website that allows individual investors to build a well diversified portfolio using
ETFs. When we update our database we
develop some unique insights regarding the growth and current state of the ETF
market. We share some of these perspectives with interested readers. One caveat: a few of the newer ETFs are not included, but we have included nearly
700 ETFs that today account for at least 99.5 % of all funds invested in US
ETFs.

First, here is a macro view of US ETFs from a net asset
value (NAV) perspective. With over $600
billion invested in ETFs, 25% is invested in the top 3 ETFs (SPY – 14%, EFA – 7%,
and EEM – 4%). Forget the 80/20 rule
here. In fact, 50% of all capital
invested in ETFs is in the top 16 ETFs, or the top 2%. Only 100 out of 693 ETFs have an NAV of over
$1 billion and only 55 ETFs between $500m and $1 billion. In fact, half of all ETFs have an NAV under
$75 million. Lower NAVs imply less
volume and liquidity. Thus, all of the discussions
that caution investors about the bid/ask spread risk of buying ETFs is
justified when so many have such limited liquidity and volume.

Second, we multiplied the fees charged for each ETF by its
NAV to see how much the ETF industry as a whole was extracting from investors
in fees and the number is…. $2 billion per year, an average of .29% in fees based
upon the $600 billion invested for the industry as a whole. Ironically, the world’s largest ETF – SPY
only makes State Street
$67 million per year in fees (.08%) while Barclays iShares charges .74% on EEM and
.34% on EFA and receives $330 million per year in fees on these two products
alone — about 17% of the entire industry. No wonder Vanguard is racing ahead with lower fee alternatives in VEA
(.12%), VWO (.25%) and VEU (.25%).

For our software we’ve created our database with ETF
classifications in 12 groups. It gets
really fun when drilling down into these categories and looking at where, in
aggregate, the ETF providers are offering products and where investors are
enjoying more choices. Experts could
debate us forever, but we’ve made these decisions so that individual investors
could easily make choices based upon the dizzying array of products that
continue to be put into the market. Here
are the ETFs in each of our categories:

Sector Funds. We find it most interesting that the largest ETF
category, are sectors with 180 funds. The basic sectors include the following ETFs sorted by the number of
offerings in each:

Is it my imagination, or are the providers going a little
crazy with 41 ways to index the healthcare industry and 32 to index technology? I guess it would stand to reason that where
there is high volatility, there are more ETF products. Of course there are the usual colors and
flavors of sector ETFs. You can buy them
on a global basis, equally weighted or even leveraged.

US Stocks. There are 172 ETF funds that focus on the US
Stock market. The range spans from 11 funds
that index the “Total Market” to 4 that let you invest in the smallest of small
US Stocks – the microcaps. There are 85
Large Cap, 41 Mid Cap, and 31 Small Cap US Stock ETFs. But it gets better. US Stock market ETFs offer many ways to
index. There are dividend weighted,
value, growth, blended, leveraged, and even quant strategies for nearly all of
each size and style. I wonder what one
could possibly dream up for another US Stock ETF!

Commodities. Of the 78 Commodity funds, 9 are agricultural
focused, 3 give you exposure to the new Cleantech companies, 15 are solely
exposed to various metals like gold (GDX, IAU), silver and other precious
metals, 4 are water only and 50% (39 funds) index energy in some way. Of
these, there are a variety of choices including: alternative energy, gas, oil, drilling
services, fully diversified, exploration and production companies. There are also various indexing techniques
including dividend oriented and equal market cap weighted. For example, want to build a pair of index
exploration / production companies and oil services companies? IEO / IEZ are market cap weighted, while XOP
/ XES are more equally weighted all with basically the same kinds of companies
– your choice.

Foreign Developed
Markets. This group now consists
of 67 funds, of which 22 index individual countries like Canada (EWC) and Japan
(EWJ). There are 26 funds that we call
“Continents and Regions” where one can get exposure to a specific group of
countries like just Asia or just Europe. Once
you’ve picked your area of choice, you have more choices of how you’d like to
index. The rest are generally
diversified but there are flavors. Want
one that focused on dividends, or one that equally weights all the stocks? No problem.

Bonds. Of the 52 funds that have recently been
opened for bonds, 14 are muni bond funds and 16 are just US government bonds. These funds can be purchased as short,
intermediate and long term as well as a blend of time horizons. The remaining
22 funds are a smattering of corporate, credit and mortgage and now new
emerging and foreign market bond funds.

Shorts. We categorize all funds that bet against a
market or a sector in this one classification as individual investors generally
think about these allocations as hedges. Of the 41 ETFs that allow you to “bet against” something, 15 are
sector-focused, 20 are US stock market oriented (small, mid and large cap), and
6 allow you to short foreign markets. And of course if just a plain short isn’t good enough, you can get twice
the hedge in one ETF like the SDS.

Emerging Markets. This group now consists of 37 funds, of which
18 are individual countries like China (FXI) and Brazil (EWZ), but not to be
left behind, Israel (EIS), Thailand (THD), and Turkey (TUR) now have their own
ETFs. There are 12 funds that we call
“Continents and Regions” where you can own an area of the world like Latin
America (GML). The rest are fully diversified
funds covering all emerging market countries.

Real Estate. There are now 27 real estate funds – 18
focused on the US Real Estate market and 9 on International markets. These products are so diverse that you can
now invest in just office buildings, apartments buildings and even mortgage
REITs. There’s now an ETF that allows
you to invest in Chinese Real Estate (TAO). You can now invest in real estate everywhere but the US (WPS).

Right now, with the 38 funds that collectively focus on
currencies, lifecycle, TIPs and world markets, there’s not as much going on
that’s as interesting as in our other classifications, but you can be assured
that where there are open opportunities, the ETF provides will surely attempt
to fill the gaps! Stay tuned….