Tag Archives: iShares iBoxx $ Investment Grade Corporate Bond Fund

Small ETFs Struggle as 18 Funds Hold Half of Industry’s Assets

If you’re looking for a reason why many of the ETFs launched last year failed to raise the $30 million in assets necessary to turn a profit and stay open take a look at the $10 Billion Club.

While there are more than $1 trillion in assets in the entire U.S. ETF industry, the majority are confined to about 100 funds, “leaving the other 1,300 ETFs in the dust,” says ETF Database.

Yesterday, I said many investors remain risk-adverse in today’s volatile market, leaving them squeamish about buying into hypertargeted ETPs. They prefer to stick with big, liquid funds tracking well-known indexes both because they understand what the index tracks and because they can get out quickly in an emergency. Other reasons why small, niche funds are having a hard time gathering assets is because institutional investors and investment advisors are restricted to buying products with minumum requirements for assets under management, average daily volume and age of the fund.

This leaves just 18 ETFs holding nearly half the assets of the entire ETF industry, according to ETF Database, which calls the group the $10 billion club because they all have more than that under management.

It’s no surprise who tops the list:

SPDR S&P 500 (SPY)
SPDR Gold Trust (GLD)
Vanguard MSCI Emerging Markets ETF (VWO)
iShares MSCI EAFE Index Fund (EFA)
iShares MSCI Emerging Markets Index Fund (EEM)
iShares S&P 500 Index Fund
(IVV)
PowerShares QQQ (QQQ)

The big surprises to my eyese were the iShares iBoxx $ Investment Grade Corporate Bond Fund (LDQ) and the iShares iBoxx $ High Yield Corporate Bond Fund (HYG).

Discussing Best ETFs on the Radio

I will be discusshing the four ETFs found in this year’s Best List 2010 on the “Financial $pectrum” Show with host Bill Kearney tomorrow, Wednesday, on radio station WKXL-AM in Concord, N.H. The live phone interview will be about 20 minutes at 11:35 a.m.

To hear over the Internet, go to WKXL-AM and click Listen Live.

The best ETFS in the categories of currency, bonds, water and emerging markets are:

CurrencyShares Japanese Yen Trust (FXY)
Three-year annualized return: 12.2%

iShares iBoxx $ Investment Grade Corporate Bond Fund (LQD)
Three-year annualized return: 8.5%

First Trust ISE Water Index Fund (FIW)
Three-year annualized return: -4.4%

WisdomTree Emerging Markets SmallCap Dividend Fund (DGS)
Annualized return since inception: 3.4%