Morningstar on Thursday announced iShares as the winner of its best exchange-traded fund provider award at the research firm’s second annual awards for U.S. ETFs and ETF providers at its annual conference in Chicago.
For the first time, the Morningstar ETF awards in 2013 also recognized ETF category winners for two classes of investing objectives, investor and trader, based on total cost of ownership and performance. For example, the U.S. ETF commodities precious metals category award for investors went to the iShares Gold Trust (IAU) while the trader category award went to SPDR Gold Shares (GLD).
“This year, we recognize that not all ETFs are created equal and not all investors are created equal, so we recognize what serves investors’ needs,” said Ben Johnson, Morningstar’s director of passive funds research, in announcing the winners at the ETF Invest Conference. “We have differentiated between the trader class and investors class. The cost of liquidity trumps holding cost for traders while investors want a better ongoing holding cost and are not so concerned about liquidity.”
Morningstar identified investor and trader class winners across 40 ETF categories, with the category winner receiving the highest ranking in the category versus its peers.
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The ETF providers with the most category winners in both the investor and trader classes within each U.S. category group received the Morningstar Best ETF Provider award. In this year’s awards, iShares had 31 category winners, followed by Vanguard with 23.
The Best ETF Providers in four U.S. category groups were iShares for U.S. stock, iShares for international stock, Vanguard for sector stock and iShares for taxable bonds.
Johnson 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.”