Morningstar held their annual ETF conference last month in Chicago where they identified winners across 40 ETF categories, with the category winner receiving the highest ranking in the category versus its peers.
The Morningstar Awards for ETFs and ETF providers consider risk-adjusted returns; the ability of the ETF to track its index; and the total cost of ETF ownership, based on an ETF’s estimated holding cost, tracking volatility, and market impact cost. To be eligible, ETFs must have three years of performance data as of June 30, 2013; more than $100 million in assets. To view the full methodology process view, please visit here.
It was the first year Morningstar identified an Investor class and a Trader class for each category. The goal was to distinguish the investing objectives of retail investors, who tend to invest a smaller dollar amount over a longer time period, and traders, who may invest a larger dollar amount with a greater need for liquidity.
Tough Competition for Smaller EFT Providers
Ben Johnson, Morningstar’s Director of Passive Funds, acknowledged that it was becoming increasingly difficult for smaller ETF providers to compete, especially in core categories. “It’s not winner takes all, but winner takes most,” he said, in reference to iShares and Vanguard. “Scale begets scale and success begets success. The Morningstar styleboxes are firmly entrenched, and I don’t see that changing any time soon.”
In this year’s awards, iShares had 31 Category Winners and Vanguard received 23. To view a full list of the Morningstar ETF Category Winners in the Investor and Trader, please visit here.