Analysts have been ranking stocks with "outperform" or "buy" calls for years, but in the 10-year history of ETFs, no major research firms have been giving overall rankings to ETFs. S&P will be selling the new service to brokerages and the buyside with the equity ranking. The move is likely to spur research firms looking to take advantage of the growing ETF market to follow in its footsteps, industry consultants said.
"It allows us to look at an ETF as a security, which is necessary now that ETFs have become a must-have for asset allocations among financial advisors," said Ken Leon, senior director in equities at S&P and designer of the service. S&P decided to launch the service now because the ETF market has grown rapidly over the past five years and investors need to be able to compare offerings.
Morningstar Equity Research creates and sells analytics on ETFs, but it doesn't rank them like individual stocks. Jeffrey Ptak, head of ETF research, couldn't be reached for comment.
In the first quarter of this year, 25 new ETFs were listed, bringing the total to about 660. By 2010, the number of ETFs is expected to reach 2,000, with an overall value of about $2 trillion, according to recent Morgan Stanley research.