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Small Firms Squeeze Into ETF Space

This article appears courtesy of Institutional Investor


The road to exchange traded fund success isn't an easy one. With the pioneers – State Street Global Advisors and Barclays Global Investors – so firmly entrenched, the deck is stacked against upstart firms. BGI, SSgA, the Bank of New York and The Vanguard Group hold more than 95% of ETF assets, according to Morgan Stanley. BGI alone offers 101 of its signature iShares, and SSgA accounts for another 32, including the hugely successful SPDRs.

Still, the last few years have seen a number of new faces in the ETF sponsor crowd, beginning with PowerShares Capital Management, Rydex Investments and fund giant Fidelity Investments becoming a member of the club in 2003. This year, J.W. Seligman and First Trust Advisors joined the scrum, with more on the way.

In the face of big-player dominance, smaller firms have had to fight on their wits: Creativity and innovation are paramount to survival, as is finesse. "In this jungle, there are 800-pound gorillas like BGI, and we don't intend to try to upset the nest," Dan Waldron, First Trust's director of business development, says.

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