The 10 Most Profitable ETFs In The World

by on January 25, 2012

The ETF industry has long been known for the many advantages that it offers over competing mutual funds and other investment vehicles. One of the most significant upsides that exchange traded products have is their relatively low expenses; investors can gain exposure to asset classes of all kinds for a reasonable price. In fact, cheap ETFs have become so popular in recent years, that issuers have even started competing by slashing expense ratios to try and get a leg up on their more expensive competition, and some evidence shows that the strategy is paying off well. But while many investors are concerned with how much an investment will cost them, few stop to think about what that particular investment yields for its issuer [see also 12 High-Yielding Commodities For 2012].

A number of exchange traded funds in the space have gargantuan assets and some have large expense ratios to go along with it. Perhaps one of the most interesting ways to look at cost efficiency of the industry is to examine how much revenue issuers are taking in off of an individual fund and if this suggests anything about its fee structure. Below, we outline the ten most profitable ETFs in the world, and some of the results might surprise you.

Ticker ETF ER Assets* Annual Revenue*
 GLD SPDR Gold Trust  0.40%  $66,797,376 $267,189.50
 EEM MSCI Emerging Markets Index Fund  0.69%  $34,636,992 $238,995.24
 EFA MSCI EAFE Index Fund  0.35%  $37,332,659 $130,664.31
 VWO Emerging Markets ETF  0.22%  $46,839,420 $103,046.73
 SPY SPDR S&P 500  0.09%  $98,378,880 $88,540.99
 EWZ MSCI Brazil Index Fund  0.61%  $10,266,629 $62,626.44
 HYG iBoxx $ HY Corp Bond Fund  0.50%  $11,916,320 $59,581.60
 QQQ QQQ  0.20%  $28,850,771 $57,701.54
 SLV Silver Trust  0.50%  $9,220,710 $46,103.55
 FXI FTSE China 25 Index Fund  0.72%  $6,330,038 $45,576.28
*In Thousands. As of year end 2011.

Commentary

Taking a deeper look at this list reveals some interesting trends in the industry. For example, EEM, which is 47 basis points more expensive than the competing VWO, nearly doubles the profit of the next nearest competitor. GLD is another ETF that may scream overpriced given that its competing IAU is 15 basis points lower than GLD’s 0.40%. But it is also important to note that funds like SPY made the list simply because of their massive assets under management; SPY is one of the cheapest ETFs available today. Whether or not you think some of these funds are fairly priced, there is a glaring difference between the top two funds and the remaining eight on the list [see also Five Compelling Long Term Trends (And ETFs To Play Them)].

As cost competition continues to heat up in the ETF world, it would not be surprising to see this list have a very different makeup even just a year from now. For example, 2011 saw EEM lose over $7 billion in assets while VWO jumped by about that same margin. There was a similar trend between GLD and IAU. While cheaper funds may not replace their more expensive counterparts, but it will be interesting to see if their increased popularity will lead to bigger profits for issuers in the coming years [see also ETFs: The $10 Billion Club].

Disclosure: No positions at time of writing.