The landscape of the exchange-traded fund (ETF) market in the United States is undergoing shifts as BlackRock’s iShares faces challenges to its dominance from competitors, primarily Vanguard and smaller rivals. As of November, BlackRock’s iShares held about 32% of the US ETF market, down from 33.7% in late 2022 and more than 7 percentage points lower than the end of 2018.
Vanguard, in particular, has been gaining ground by focusing on low-cost, broad-based strategies in stocks and bonds. Investors are drawn to Vanguard’s cheap, broad-market index funds, contributing to the erosion of BlackRock’s market share. While BlackRock’s iShares aims to offer a diverse range of ETFs, Vanguard’s focused approach on cost-effective, core strategies has resonated with investors.
Interestingly, BlackRock’s success story in the US contrasts with its performance in Europe. In Europe, BlackRock has maintained a steady 44% share of the $1.7 trillion ETF market over the past five years. This stability is attributed to BlackRock’s early entry into the European ETF market and its establishment of strong relationships with institutional clients.
Vanguard’s rise in the US market has seen its share increase from about 25% to around 29% since 2018. State Street Global Advisors has experienced a slight decline from almost 17% in 2018 to just under 15% as of December 2023, while Invesco has seen a modest increase from 5% to nearly 6%.
Two newer players in the US ETF market, JPMorgan and Dimensional Fund Advisors, have aggressively expanded their ETF offerings. Together, they now control 3% of the market, up from less than 1% in 2018. Both firms have converted existing mutual funds into ETFs, leveraging their existing asset bases.
In Europe, besides iShares, Amundi and DWS’s Xtrackers hold substantial shares of the ETF market, with Vanguard managing about 6.6%. The competition in Europe is growing, reflecting the overall expansion of the ETF market, which has grown from about $765 billion at the end of 2018 to over $1.7 trillion.
As the ETF market evolves, competition intensifies, and investors seek specific strategies and cost-effective solutions, fund managers are adjusting their approaches to gain or maintain market share. The dynamics of the ETF industry will likely continue to evolve as investors’ preferences and market conditions change.
