U.S. asset managers continued to launch new exchange-traded products in the first half of 2019, seeking to gain a growing slice of the $4 trillion-and-counting pie.
The 130 new offerings tracked by First Bridge, a recently acquired CFRA business, are only slightly below the pace of new ETFs and ETNs that came to market in 2018.
Yet there’s been a notable shift in which firms have expanded their lineups this year, with the top five firms acting passively after actively expanding their offerings last year.
Somewhat Quiet On The Big 5 Side
iShares is the lone top five firm to have aggressively expanded its ETF suite in the first half of 2019. The 17 new funds nearly matched the 19 from all of 2019. The iShares Self-Driving EV and Tech ETF (IDRV) is a new thematic fund that holds a combination of consumer discretionary, industrials and information technology stocks, such as Toyota Motors and Qualcomm.
(Use our stock finder tool to find an ETF’s allocation to a certain stock.)
The firm also expanded its Japan-focused suite with a low-cost, smart beta twist. One new ETF is the iShares MSCI Japan Equal Weighted ETF (EWJE), which charges a modest 0.15% expense ratio and provides a more security-diversified approach than the iShares MSCI Japan Equal Weighted ETF (EWJ).
CFRA rates more than 1,200 equity ETFs based on holdings-level analysis and fund attributes, including costs. Since our approach does not solely rely on past performance metrics, we typically begin coverage within the first three months of an ETF’s history, faster than peers.
We also find ETF.com’s Daily ETF Watch section is a great way for investors to keep track of the dizzying number of launches and closures.
No 2019 Launches From Invesco & Vanguard
In contrast to iShares, Vanguard and Invesco did not launch any new ETFs in the first half of 2019, after bringing a combined 33 to market last year.
Vanguard’s introduction of nine new products in 2018 was relatively rare for the second-largest provider. In contrast, the firm launched only four ETFs between 2015 and 2017. The 2018 expansion was primarily focused on deploying actively managed factor funds. The Vanguard U.S. Value Factor ETF (VFVA) is one such example we cover.
Meanwhile, Invesco, the fourth-largest provider, has more than 200 ETFs, aided by more than 20 funds that launched in 2018, as well as recent acquisitions. The newly traded funds include an expansion of its taxable bond BulletShares suite with targeted bond maturities. The Invesco BulletShares 2023 Emerging Markets Debt ETF (BSCE) is one such example.
In rating more than 200 fixed income ETFs, CFRA incorporates credit quality, duration and yield with fund attributes, such as liquidity and costs.
Oppenheimer Funds Rebranded
We think the 2019 addition of funds previously offered by Oppenheimer Funds, including the Invesco Russell 1000 Dynamic MultiFactor ETF (OMFL), slowed Invesco’s new product pipeline.
However, the firm has filed for 10 municipal bond BulletShares, with maturity dates ranging between 2021 and 2030. These pending ETFs will likely compete with an existing iShares suite later this year.
With just two new funds from SSGA, and none from Schwab, smaller ETF players and new entrants have had the opportunity to educate investors about their latest products.
Some Issuers Shift Gears
For example, Direxion Investments is well known for its leveraged and inverse ETFs, but the company added 10 relative-weight ETFs that provide tilted asset allocation exposure.
The Direxion MSCI USA Cyclicals Over Defensives ETF (RWCD) is one such ETF, and it has long exposure only to communications services, consumer discretionary, financials, industrials, information technology, materials and real estate sectors, but short exposure to defensive sectors, such as consumer staples, energy and utilities.
Meanwhile, the Direxion MSCI USA Defensives Over Cyclicals (RWDC) has long exposure to the defensive sectors and short exposure to the cyclical sectors.
CFRA will be hosting a webinar on Aug. 13 at 11 a.m. ET covering cyclical versus defensive investing. (To register, visit here.)
Meanwhile, Goldman Sachs launched six new ETFs in the first half of 2019, five of which are thematically oriented.
They include the Goldman Sachs Motif Manufacturing Revolution ETF (GMAN). GMAN owns primarily consumer discretionary, industrials and information technology stocks such as Amazon.com (AMZN) and Rockwell Automation. In 2018, Goldman launched only two ETFs and one ETN.
Zero-Fee ETF Lands
We previously wrote how fintech firm SoFi crashed the ETF party in April 2019 with its first funds and the first zero-fee ETFs, the SoFi Select 500 ETF (SFY) and the SoFi Next 500 (SFYX). The firm now has four ETFs, with the addition of two more funds in May that charge net expense ratios.
CFRA thinks we will continue to see established ETF providers and new entrants bring funds to the market in the second half of 2019, including some large firms that have, to date, stayed on the sidelines. As investors further embrace the ETF wrapper, asset managers are eager to test out new strategies.
Our holdings-based research, aided by the August acquisition of First Bridge data, is well-suited to provide insight into the latest offerings and how they compare to more established funds.
At the time of writing, neither the author nor his firm held any of the securities mentioned. Todd Rosenbluth is director of ETF and mutual fund research at CFRA, an independent research firm that acquired S&P Global Market Intelligence's equity and fund business in October 2016. He can be reached at [email protected]. Follow him on Twitter @ToddCFRA.