by Michael Johnston on November 15, 2010 | Updated November 16, 2010 | ETFs Mentioned: EEM GDX TLT VWO

As the ETF industry pushes towards the $1 trillion in assets mark, the competitive landscape continues to evolve on a daily basis. Recent months have seen several issuers implement aggressive expansions of their product lines, while others have scaled back unsuccessful products or pulled out of the ETF business altogether. As issuers become more disciplined in their product development initiatives, the success rate among new products seems to climb. Yet some new products are much more successful than others in terms of generating assets, and the continued rise of the ETF industry has not benefited all the players equally.

Source: NSX as of 10/31/2010

But despite these dominant positions, the industrys big dogs are facing some stiff competition from a number of smaller ETF issuers. iShares market share recently stood at about 45%, but through the first ten months of the year only about 28% of cash inflows had been to iShares productsan inflows/assets market share multiple of about 0.60. State Street, second in market share at about 24%, has accounted for less than 10% of 2010 inflows (those figures include MDY. which the NSX attributes to BONY, as a State Street product). PowerShares ETFs (excluding the Deutsche Bank products), accounted for 5.5% of total ETF assets at the end of October, yet generated only about 2.4% of year-to-date inflows. The bright spot among the industrys larger issuers is Vanguard, which has seen its market share grow by about 3% over the last year. Vanguard ETFs have seen about 36% of 2010 inflowsabout 2.5 times the October market share of 14.4% [for complete coverage of the ETF industry, sign up for our free ETF newsletter ].

A portion of Vanguards impressive growth is likely the result of a migration among ETF investors towards the most cost-efficient products. Vanguards Emerging Markets ETF (VWO ), for example, saw inflows of more than $16 billion during the first ten months of the year$10 million more than a competing fund from iShares (EEM ) that also seeks to replicate the MSCI Emerging Markets Index. VWO charges an expense ratio of 0.27%, 45 basis points below EEM.

But even Vanguards relative growth pales in comparison to the figures for some smaller ETF issuers. WisdomTree. for example, has accounted for about 2% of inflows in 2010more than twice the companys ETF market share. First Trust has pulled in close to $2 billion in inflows through the first ten months of the yearabout 2.2% of the industry totaldespite accounting for less than 0.5% of U.S. ETF assets. Most of the ETF issuers with under $5 billion in assets are growing at a breakneck pace, as measured by the ratio of market share of inflows to market share of ETF assets. Among the most impressive so far in 2010 are IndexIQ (8.6x), EGShares (8.1x), ALPS (8x), and Global X (7.9x). Those issuers make up just 0.2% of ETF assets, but have generated nearly 1.5% of total 2010 inflows. Also experiencing impressive growth are two financial giants that are relatively new to the ETF space: PIMCO and Schwab combine for less than half of one percent of total ETF assets, but are responsible for 3% of inflows so far this year [see the full list of PIMCO ETFs here ].

Its also interesting to note that the super tickers that account for a huge portion of industry assets arent pulling away from the smaller funds. The 25 largest ETFs that made up 53% of assets at the end of October have accounted for only about one third of year-to-date inflows, and more than a quarter of this group has seen net outflows so far in 2010.

The dominance of the big dogs of the ETF world isnt in danger, given the sizable lead the larger players in the industry maintain over the rest of the pack. But a closer look at some of the numbers indicates that the landscape continues to evolve, and that many of the smaller ETF issuers out there are enjoying success with their niche products. That is, of course, good news for investors, since more issuers can only lead to a greater array of products and ongoing cost competition [see ETF Pipeline Grows: More Hedge Fund Products, VIX ETNs In The Works ].

ETNs: Back In Style

Also gaining ground somewhat surprisingly are exchange-traded notes (ETNs). These securities dont offer investors an ownership interest in an underlying basket of securities, but are rather debt instruments whose returns are linked to the performance of an index. As such, ETNs expose investors to the credit risk of the issuing financial institution. That risk factor jumped out as a major red flag in recent years, as the viability of many Wall Street institutions was called into question and one ETN issuer, Lehman Brothers, went under. But with big banks back on relatively stable financial footingBarclays, JPMorgan, Deutsche Bank, and UBS are among the largest issuers of ETNsit seems as if investors are once again embracing ETNs as preferred means of exposure for certain asset classes [see Five Ultra Popular ETNs ].

ETNs accounted for only about 1.4% of total ETP assets at the end of October, but have generated more than 5% of industry inflows so far this year, far outpacing expansion of previous years. One big reason for this surge is the tremendous interest in the MLP space; there are now seven MLP ETNs available to U.S. investors, and these products had seen aggregate inflows of more than $1.5 billion through the first ten months of the year [also read MLP ETNs: A Different Breed Of Equity Exposure ].

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Disclosure: No positions at time of writing.