Are There Too Many ETFs?

NEW YORK (TheStreet) -- The ETF industry continues to expand rapidly, as new products hit the market and issuers file for additional funds.

According to recent data from the National Stock Exchange, the number of listed ETFs has jumped 11 percent from 716 in October of 2008 to 796 in October of 2009.

Issuers have begun to target increasingly narrow regions of the market, looking to claim first-mover status. Investors can now buy the Oklahoma ETF(OOK Quote) or the Market Vectors Brazil Small-Cap ETF(BRF Quote), both launched in 2009, and access these specific locales.

Investor interest in ETFs seems only outmatched by the eagerness of issuers to launch new funds, and it is important to ask if we have come too far too fast.

Assets are flowing into many different regions of the ETF marketplace, but much of the money is concentrated in top funds. October NSX data states that more than $707 billion is invested in ETF funds.

Of that amount, more than $268 billion is invested in the top 10 largest ETFs. This group includes broad index funds like the SPDR S&P 500(SPY Quote) and iShares S&P 500(IVV Quote), commodity funds like SPDR Gold(GLD Quote), and emerging market funds like the iShares MSCI-Emerging Markets (EEM Quote) and Vanguard MSCI Emerging Markets(VWO Quote).

While the list of top funds confirms the dominance of issuers like State Street and iShares, it also underscores the importance of competition in the industry. EEM, which was launched in April of 2003, was considered the dominant emerging markets ETF in the wake of its release.

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