Choppy ETF Launches? Blame Russia
Closures of exchange-traded funds are outpacing last year's, too.
The ETF industry was on track to outpace 2021 in terms of launches as of the close of April, despite that year’s unprecedented level of 318 new funds. As of the end of April, there were 143 new ETFs on the market versus 120 launches by that date a year prior.
But the chart below shows the trend is uneven. That mainly seems due to Russia’s invasion of Ukraine.
Sources: FactSet, ETF.com
Of course, there are other forces in play, but Russia’s assault on Ukraine started Feb. 24. Prior to that, ETF launches had been dramatically outpacing that of the prior year, with newcomers Capital Group and BondBloxx launching ETF suites that added significantly to the count.
In January, the industry saw 37 new funds added, outstripping January 2021 by 16 funds right out of the gate. In February of this year saw 44 funds launch, versus the 19 that launched in February 2021. The gap was widening.
Then, the week after the invasion, there was only one ETF launch. No other week this year has had so few launches, and March was the first month of 2022 that trailed the prior year for launches, with 29 new funds versus the 31 that rolled out in March 2021.
The industry recovered in April, with 33 launches to the prior year’s 31. Four trading days into May, we’ve seen five launches, suggesting the breakneck pace might resume soon, even with economic uncertainty looming and the Russia-Ukraine war still raging.
Active ETFs are dramatically outpacing passive this year, with 86 of the 143 new launches relying on active management, or approximately 60%. That percentage is a little lower than for the first four months of 2021, when it was 66%, but it’s still significant that active launches are outpacing passive launches by a wide margin.
Closures Picking Up
2021 was also a landmark year for closures. The number of shutdowns was the lowest in roughly a decade, with just 79 completed closures. But that was unsurprising given the vicious pruning that took place in 2020, which saw 275 ETF shutdowns, an all-time record.
By the end of April, there were 26 completed closures, whereas there had been only 19 during the same period in 2021. That gap looks to be widening in May, with ProShares adding eight more shutdowns to the count as of May 3, and another three are expected from Nationwide by the end of the month. Even with no additional closures completing in May, that will put 2022 ahead of 2021 by 16 shutdowns.
Contact Heather Bell at [email protected]
