New ETF Issuers Are Chipping Away at BlackRock, Vanguard, State Street Dominance

There are way more Davids up against the ETF Goliaths, and it’s starting to take a toll. 

The combined share of ETF inflows for the three largest ETF issuers was around 80% roughly six years ago, but now sits at just 55%, according to recent data shared by Bloomberg Intelligence. The chipping away of BlackRock, Vanguard and State Street’s dominance is in part due to the boom in new ETF issuers and funds. Last year, the US saw 1,000-plus ETF launches and we’re easily on track for another record this year. Some of the little guys are having to get creative to compete (think UFOs). There are also crazes around single-stock, leveraged and other more experimental funds.

“It’s pure competition,” said Todd Sohn, chief ETF strategist for Baird Strategas. “Everybody’s getting into the space, and it’s going to come down to how strong your product set is and what your distribution plan is.” 

First-Mover Advantage 

To be clear, 55% of ETF inflows is still a major advantage. The size of the big three issuers versus all other issuers is “breathtakingly big,” Bloomberg Intelligence analyst Eric Balchunas wrote on X. “They’ve got nothing to worry about.” They also aren’t necessarily interested in stealing back market share through niche thematic plays: 

• “I would not, honestly, expect BlackRock and State Street to be chasing 2X leveraged options-income return-of-capital, sports-betting, obscure crypto or any of the other degenerate, high-concentration corners of the market that have come in screaming with flow this year,” said Dave Nadig, president and director of research at ETF.com. 
• Instead, he said he’d expect them to do “exactly what BlackRock has done” — wait and see where the real appetite is, then swoop in and gobble up assets, as it did with iShares Bitcoin Trust ETF (IBIT) after interest in crypto exploded. 

But the giants can be slower-moving ships, since upstart issuers may have less red tape, making it easier for them to get new and different types of exposure on the market than it is for the ETF giants. “If you can get a head start … on a hot theme or a different type of solution, that’s how you chip away at some of that market share,” Sohn said, pointing to JPMorgan jumping on covered call funds around six years ago and those becoming massive products for the firm as an example. 

Long-Lasting Trend? There may be a floor to how much market share smaller issuers can gobble up, and the wild card is the equity market, Sohn said. “If you have a rising equity market, you do some rebalancing,” he added. “But unless you really get the tree shaken and you go to a drawdown, it’s hard to put new money to work in different types of areas.”