Money managers' battle for ETF market share will be facing two fronts in 2012: new firms entering the market and a bigger-than-ever push into active strategies.
In addition, all eyes are on Pacific Investment Management Co., Newport Beach, Calif., which is seeking to become the first money manager to essentially clone a popular mutual fund into an exchange-traded fund, analysts said.
All want to gain a foothold in the business that is dominated by three players with more than 80% of the ETF market: BlackRock Inc.; State Street Global Advisors; and Vanguard Group Inc.
BlackRock's iShares unit holds almost 43% of the $1.05 trillion North American ETF market, followed by SSgA with 25.3% and Vanguard with 16%. After that the curve drops precipitously; the fourth biggest ETF provider, Invesco Power Shares Capital Management LLC, has only 4.2% of the market.
Of the top three, only BlackRock has an active ETF, and it's just one of the company's more than 200 ETFs.
Executives at iShares, the ETF unit of BlackRock, and SSgA said they plan to launch several active ETF strategies in 2012. Vanguard filed applications for three active ETFs with the Securities and Exchange Commission in 2008, but is still waiting approval.
PIMCO plans to offer an active ETF version of the world's largest mutual fund, the $244 billion PIMCO Total Return Bond Fund. The ETF would be managed by William Gross, PIMCO founder and co-chief investment officer, according to a prospectus filed with the SEC in April.
“The (ETF) version of the Total Return Bond Fund could be a game-changer,” said Paul Justice, director of North American ETF research for Morningstar Inc., Chicago. “It would have brand presence,” he said, adding the ETF could launch as early as January. ”It could change things for the active landscape.”
New entrants with applications for active ETFs before the SEC include Legg Mason Inc., Eaton Vance Investment Managers, T. Rowe Price Inc., Janus Capital Group, Northern Trust Corp., Goldman Sachs Asset Management, J.P. Morgan Asset Management, Federated Investors Inc., AllianceBernstein LP and Neuberger Berman Group LLC.
Fidelity Investments also is waiting for SEC approval, seeking to expand beyond its one passive ETF product.