The month of January was the most muted since 2020. This year, only 21 exchange-traded funds launched during the month, trailing the 37 funds that launched during the same period last year and the 29 that rolled out in January 2021. In 2020, the month of January saw just a dozen new ETFs debut.
Given the ongoing global and economic turmoil, it’s not surprising there’s been a bit of a slowdown.
Putnam Investments, which entered the ETF market in mid-2021, nearly doubled its lineup during the month with the rollout of five actively managed environmental, social and governance ETFs, creating a fairly complete lineup of funds representing domestic and foreign equities and different slices of the bond market that could be used to construct a well-diversified ESG portfolio.
There were also two ETF launches covering the collateralized loan obligations market, one from BlackRock targeting high quality securities, the BlackRock AAA CLO ETF (CLOA), and one from newcomer Panagram, the Panagram BBB-B CLO ETF (CLOZ), covering below-investment-grade debt. Those funds join the three CLO ETFs that launched in 2022. The category began to draw attention due to its potential for generating income at a time when that’s been hard to come by.
Finally, KraneShares launched the KraneShares China Internet and Covered Call Strategy ETF (KLIP), which writes covered calls on the full portfolio value of the $8 billion KraneShares China Internet ETF (KWEB). China’s internet sector has been highly volatile, not least because of the country’s crackdown on its tech sector during the past few years. A covered call strategy could even out the performance exhibited by KWEB, offering some income and downside protection.
ETF closures are off to a strong start in 2023, with 45 having completed or been announced during the first month of the year. Fourteen ETF shutdowns completed during the month, including two that covered the bitcoin equity space and five hedge fund replication ETFs from IndexIQ. The scheduled closures also include the shuttering of the first ETF to focus on NFTs, the Defiance Digital Revolution ETF (NFTZ), which is set to close at the end of February.
However, the biggest ETF news during the month was the announcement from Invesco that it would be shutting 26 ETFs in its lineup. The issuer has the largest ETF lineup among domestic issuers after BlackRock’s iShares arm, with upward of 240 ETFs. It previously closed more than 40 funds in one fell swoop in early 2020 when it decided to streamline its ETF offering. This latest round of closures is set to complete March 30.
If the first month of the year is anything to go by, it looks like investors could expect muted closure numbers and a strong closure trend in 2023.
Contact Heather Bell at [email protected]