ETF Innovation A Tough Sell In 2016

December 21, 2016

Another record year for the ETF industry is pretty much in the bag. With two weeks left in the calendar year, the U.S.-domiciled ETF universe is on track to end 2016 with more funds and more assets than ever before.

ETF investors have even more choice now than they did just a year ago: 1,953 funds as of Dec. 14, an increase of 109 over year-end 2015. ETF assets continue to grow, standing at $2.55 trillion as of Dec. 13, up 18.6% from $2.15 trillion at the end of 2015.

Oddly, the expanding ETF census doesn’t explain the asset growth. New ETF launches in 2016 have not met with much success. Of the 223 funds that launched this year, only 11 have cracked the $100 million mark. That’s only half 2015’s total.

Sticking To Established Themes

There’s only one truly new idea in that group of 11: the SPDR SSGA Gender Diversity Index ETF (SHE). The runner-up WisdomTree Dynamic Currency Hedged International Equity Fund (DDWM) added a variable currency hedge to a well-established index, but otherwise broke no new ground.

The rest of 2016’s successful new launches are me-too products; bespoke strategies packed as ETNs, fund-of-funds, next-in-a-suite fillers or late entrants to crowded spaces from old-line mutual fund issuers.

The picture looks even grimmer for new launches when you look at 2016 fund flows. In all, 84 ETFs attracted $1 billion or more this year, but only three of those were launched after 2013. Worse, one of those was a spin-off of real estate holdings, the Real Estate Select Sector SPDR Fund (XLRE), from the giant Financial Select Sector SPDR Fund (XLF), so it wasn’t really a new investment.

Really, only two funds launched after 2013 gained $1 billion or more so far in 2016: Jeff Gundlach’s SPDR DoubleLine Total Return Tactical ETF (TOTL) and the Goldman Sachs ActiveBeta U.S. Large Cap Equity ETF (GSLC).

 

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