- Nearly three dozen U.S.-listed ETFs that launched since the start of 2018 had $1 billion-plus in assets as of May 2021. Unlike with mutual funds, investors are not reliant on a three-year track record when buying an ETF.
- The Communications Services Select Sector SPDR (XLC) will turn three years old next week, but already had $14 billion in assets at the end of May 2021.
- Meanwhile, the four-star-rated JPMorgan BetaBuilders Japan (BBJP) and the three-star JPMorgan BetaBuilders Europe (BBEU), two low-cost ETFs that track cap-weighted Morningstar indexes, have a combined $17 billion in assets ahead of next week’s third anniversary.
Investors Not Waiting 3 Years To Buy An ETF
At the end of May 2021, there were 529 U.S.-listed exchange-traded products tracked by CFRA with at least $1 billion in assets. While most of the funds that achieved this critical mass had been trading for more than a decade, 35 (6.7%) products that launched since the beginning of 2018 had passed through the key $1 billion mark.
We believe as more ETFs come to market, investors will focus more on the use case of the products rather than treat the funds like old-world mutual funds that need to demonstrate a long performance record.
No. Of ETFs With $1B-Plus In Assets Grouped By Inception Date
Source: CFRA’s ETF database as of May 28, 2021
XLC Turns 3 Years Old
By providing somewhat diversified exposure to S&P 500 Communication Services stocks, XLC was well-positioned to gather assets relatively quickly when it launched on June 18, 2018.
Soon after the fund began trading, the GICS Communication Services sector was formed. That brought together the dual-share classes of Alphabet [Google] and Facebook from the information technology sector, with AT&T and T-Mobile from the telecom services sector, as well as Comcast, Disney and Netflix. The $14 billion ETF’s top 10 holdings recently represented 78% of assets and has been popular with investors making tactical sector decisions. Age of the fund doesn’t seem to a strong concern.
(Use our stock finder tool to find an ETF’s allocation to a certain stock.)
Building Better Beta
JPM’s low-cost international equity ETFs also exploded onto the scene during the summer of 2018. JPM ended May 2021 as the seventh largest U.S. ETF provider, aided by offering market-cap-weighted exposure to single-country and international regions tracking Morningstar indexes.
Both BBEU and BBJP had $8.5 billion in assets at the end of May, ahead of turning three years old on June 15. With expense ratios of just 0.09% and 0.19% for BBEU and BBJP, respectively, JPM has used its scale to aggressively compete for assets.
The JPMorgan BetaBuilders Canada ETF (BBCA) and the JPMorgan BetaBuilders Developed Ex-Japan ETF (BBAX), which launched in August 2018, and the JPMorgan BetaBuilders International Equity ETF (BBIN), which began trading in December 2019, all have exceeded $3.5 billion in assets, and are among the top 10 most successful funds from an asset-gathering perspective since 2018.
ESG Roots Grow Deeper
Active thematic and index-based environmental, social and governance (ESG) products are in demand regardless of age. In the last three-plus calendar years, low-cost, broadly diversified ESG ETFs have come to market and quickly found a following.
The Vanguard ESG US Stock ETF (ESGV) rolled out in September 2018 and already had $4.5 billion in assets at the end of May 2021. Soon after, in March 2019, the Xtrackers MSCI USA ESG Leaders Equity ETF (USSG) began trading, and recently had $3.6 billion in assets.
The funds have modest 0.12% and 0.10% expense ratios, coupled with favorable risk/reward profiles, according to CFRA Research.
How ARK Rolls
Meanwhile, the ARK Fintech Innovation (ARKF) is a more expensive but actively managed thematic ETF providing exposure to new-school financials rather than old-school banks.
ARKF recently held positions in PayPal Holdings, Shopify and Square. ARKF pulled in $2 billion in the first five months of 2021 to reach $3.6 billion in assets; impressive, considering the ETF initially began trading in February 2019. Unlike actively managed mutual funds that tend to need a three-year track record for investor consideration, investors did not delay buying ARKF.
Largest US-Listed ETFs Launched Since Beginning Of 2018
|Ticker||AUM ($B)||Net Inflows ($B)|
Source: CFRA ETF database as of May 28, 2021
The SPDR Gold MiniShares (GLDM) was also among the top 10 largest ETFs to launch since 2018. With a 0.18% fee, GLDM is a lower-cost alternative to the SPDR Gold Shares (GLD), which charges a 0.40% expense ratio and has significant assets under management: $63 billion.
The 10 most successful ETF launches since the start of 2018 have gathered a combined $60 billion in assets, aided by $13 billion of net inflows in 2021 alone.
For years, asset managers would keep new mutual funds under wraps, and investors would wait to see how they performed in their first three years before making a purchase.
But ETFs are viewed differently, and many products gain a following in the first three years.
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