iShares was named the top provider of U.S. stock, international stock and taxable-bond ETFs at the second annual Morningstar ETF Awards. Vanguard was named the top provider of sector ETFs, the only other broad category.
Morningstar ranked the best-in-class ETFs in 40 categories, both for buy-and-hold investors and those who trade more frequently. Combined, iShares and Vanguard were named the best in class in 54 of the 80 categories Morningstar ranked.
“It's becoming increasingly difficult to compete in the core categories,” said Ben Johnson, director of passive fund research at Morningstar. “Over time, as these particular categories become more and more commoditized, it won't be winner takes all, but it will be winner takes most.”
For iShares and Vanguard, their size has enabled them to do so well in the awards, as they've passed the benefits of their scale on to investors, Mr. Johnson said.
iShares and Vanguard are the biggest and third-biggest ETF companies, respectively, and combined, they manage more than $875 billion in ETF assets, or just over 57% of all ETF assets.
Even though newer entrants to the ETF world, such as Charles Schwab Investments, were able to nab some awards — the Schwab U.S. Broad Market ETF (SCHB) was named best large-cap-blend ETF in the investor category, for example — iShares and Vanguard aren't expected to lose their stranglehold on the top categories.
“The incumbents are firmly entrenched, and I don't see that changing anytime soon,” Mr. Johnson said.
One area where there could be a shake-up is between iShares and Vanguard.
Because Vanguard changed the underlying index of 22 of its ETFs last October, those ETFs weren't eligible for the main categories since they don't have a full year of tracking the new indexes, which Morningstar requires to be eligible.