The U.S. ETF industry closed out the first half with a total of 206 launches, an increase from the same period last year, but there are some aspects to consider.
2021 saw the most ETF launches ever in a calendar year, with 477 in total, 196 of which took place during the first half. The economy was rebounding strongly from the pandemic, even though it was still going on, and economic signs were mostly positive.
This year started off strongly, but signs of rising inflation and the conflict in Ukraine created global political turmoil and put pressure on still-recovering supply chains.
2022 turned tumultuous quickly.
For the first four months of the year, there were more launches each month than in the corresponding month the year before, and significantly more in January and February. But in May and June, there were more launches for each month than there were during the corresponding months in 2021.
The pace is slow for new ETFs as inflation continues to remain elevated and the U.S. stock market struggles. Interestingly, the number of actively managed ETFs that launched during the first half of 2022 is tied with last year, with 125 active ETFs launching in the first six months of both 2021 and 2022, meaning the percentage dropped slightly this year from 64% to 61%.
In terms of asset classes, there was a significant jump in the amount of new international equity ETFs, from 22% in the first half of 2021, with 32% of launches in the first half of 2022 falling within the category. Meanwhile, U.S. equity ETF launches in the first half of 2022 represented 30% of all ETF launches, compared with 46% in the prior-year period.
U.S fixed income jumped from 8% of all launches in the first half of 2021 to 13% during the same period in 2022. International fixed income launches increased from 4% of all launches in the first half of 2021 to 6% in the first half of 2022.
These changes in the trends suggest issuers are looking to offer their audiences ways to diversify from U.S. markets and equities.
Closures have picked up their pace from 2021, which was an unusual year for them. Given the record-breaking level of closures in 2020, largely due to the COVID crash, it’s not too surprising that the following year saw muted shutdowns at levels not seen for roughly a decade. Essentially, the “dead wood” was pruned away.
Their uptick this year isn’t all that remarkable—merely a return to normal levels. Still, during the first half of 2022, 61 closures were announced, with 44 of those completing by the end of June. That’s almost twice the 23 closures that had become effective by the end of the first half of 2021.
Given that there are more than 200 ETFs with less than $5 million in assets under management in a field of nearly 3,000 U.S.-listed products, if the market and economy remain rocky, we could see the trend accelerate during the back half of the year.
Contact Heather Bell at [email protected]