Breaking Down 1H 2021 ETF Launches

Key Takeaways

• More than 200 new exchange-traded products started trading in the first six months of 2021, including 51 in June alone.
• Two-thirds of the new offerings were actively managed, including the CFRA five-star rated Fidelity Magellan (FMAG), the Franklin Exponential Data ETF (XDAT) and the JPMorgan ActiveBuilders Emerging Markets Equity ETF (JEMA).
• In addition to these alpha-seeking equity products, in 2021, asset managers like First Trust and Innovator rolled out an array of defined outcome ETFs that seek to reduce the downside risk of an investor’s portfolio using options.
• Meanwhile, BlackRock and Invesco partnered with large institutional investors in the first half, enabling them to launch products with sizable asset bases within the first days of trading.

Fundamental Context

The pace of U.S.-listed exchange-traded product launches accelerated throughout the first half of 2021. On the heels of a record $504 billion of net inflows in 2020, asset managers charged into the new year with 91 new offerings in the first quarter, 36 that began trading in March.

However, the pace did not slow down in the second quarter, as 120 ETFs and exchange-traded notes (ETNs) were rolled out, including a whopping 51 in June alone. In just the last two days of June, 14 ETFs started trading. All told, 201 new products came to market in the first half of 2021, according to CFRA’s ETF database, bringing the total to 2,555.

No. Of New ETPs In 1H 2021

Source: CFRA’s ETF Database, as of June 30, 2021

Top Issuers

First Trust and Innovator ETFs were the industry leaders in product development, with a combined 35 new offerings. These two firms have continued to build out their lineups of defined outcome ETFs that employ options for downside protection, including the FT Cboe Vest U.S. Equity Buffer ETF – January (FJAN) and the Innovator Double Stacker 9 Buffer ETF – January (DBJA).

First Trust’s suite of 19 new products also includes the actively managed First Trust TCW Emerging Markets Debt ETF (EFIX), which expanded the relationship the ETF provider has with TCW, which includes the $5.2 billion First Trust TCW Opportunistic Fixed Income ETF (FIXD).

Fidelity broadened its actively managed roster with nine new products in the first half of 2021. The semitransparent Fidelity Magellan ETF (FMAG) and the Fidelity Real Estate Investment ETF (FPRO) are two of the new offerings. Fidelity is a good example of how established ETF providers have tapped into the stock selection efforts within the parent company, bringing traditional mutual fund strategies into the ETF universe.

BlackRock’s and Invesco’s lineup expansions were instant successes. BlackRock, which is the biggest manager of U.S.-listed ETF assets, launched eight new ETFs in the first half.

Two of them, the BlackRock U.S. Carbon Transition Readiness ETF (LCTU) and the BlackRock World ex U.S. Carbon Transition Readiness ETF (LCTD), began trading in April 2021, and currently have a combined $2 billion in assets due to early backing by a consortium of global institutions including the California State Teachers’ Retirement System.

Invesco rolled out seven new ETFs in the first six months of 2021, including the Invesco S&P 500 QVM Multi-Factor ETF (QVML). Despite first trading on June 30, QVML had $764 million in assets as of July 9 due to a sizable investment from the Municipal Employees Retirement System of Michigan.

Asset Managers With Highest Number Of New ETPs In 2021 

Source: CFRA’s ETF Database, as of June 30, 2021

Newcomers Enter The Market

The ETF party is not just open for the established providers. A mammoth 76 asset fund families launched a product in the first half of 2021. Many were from entrenched firms such as WisdomTree (six new ones), State Street Global Advisors (two), Schwab (one) and Vanguard (one).

However, the market also welcomed Bitwise, Engine No. 1 and Mairs & Power, among others, through new offerings that include the Bitwise Crypto Industry Innovators ETF (BITQ), the Engine No. 1 Transform 500 ETF (VOTE) and the Mairs & Power Minnesota Municipal Bond ETF (MINN).  

Actively managed products comprise a small slice of the market but dominate product development. While active ETFs represent just 4% of U.S.-listed assets at the end of June, two-thirds of the new offerings from the first half of 2021 employ active management.

We previously discussed some of the new active ETFs, including defined outcome ETFs from First Trust and Innovator and semitransparent ones from Fidelity. Indeed, 18 products launched in the first half of 2021 that do not disclose all holdings daily, including the Alger Mid Cap 40 ETF (FRTY) and the Putnam Sustainable Leaders ETF (PLDR).

However, many new active products reveal their full portfolio each day, including the ARK Space Exploration & Innovation ETF (ARKX), FMAG, JEMA, XDAT and the Horizon Kinetics Inflation Beneficiaries ETF (INFL). CFRA does not think investors are focused on how often a fund shares its portfolio, but rather, on the fund’s exposure and other fund-specific metrics.

New ETPs Actively Or Passively Managed? 

Source: CFRA’s ETF Database, as of June 30, 2021

Conclusion
The exchange-traded product market blossomed in the first half of 2021, and many of the new offerings are indeed compelling investments based on CFRA’s forward-looking ratings approach. Investors are not waiting three years before assessing an ETF’s prospects, which is why we typically begin offering a reward-potential, risk mitigation and cost-based ETF star rating within the first three months of a fund’s initial trading.

All of the views expressed in this research report accurately reflect the research analyst’s personal views regarding any and all of the subject securities or issuers. No part of the analyst’s compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report. For more information and disclosures, please refer to CFRA’s Legal Notice at https://www.cfraresearch.com/legal/.

Copyright © 2021 CFRA. All rights reserved. All trademarks mentioned herein belong to their respective owners.