ETF Launches Pick Up Pace In October

October 30, 2013

But overall launches and closures are down from 2012.

When it comes to the pace of ETF launches this year, ETF sponsors seem to be generally more guarded, rolling out a total of 136 new ETFs and ETNs year-to-date in a pace that’s roughly 13 percent slower than seen in the first 10 months of 2012.

But the intense launch schedule so far in October could also suggest that sponsors are growing more confident in global markets, and on investor appetite for all types of exposure with all levels of risk, particularly equities.

After launching 37 products in the entire third quarter of 2013, sponsors have already brought to market 28 new U.S.-listed exchange-traded products in October alone—averaging more than a launch per trading day.

The selection of newcomers to the now-1,525 ETF market is widely diverse, including everything from U.S. sector funds, to international equities, to short-term debt ETFs to first-of-a-kind strategies like Exchange Traded Concept’s robotics-focused ETF “ROBO.”

Compared with year-earlier figures, in the first 10 months of 2012, ETF sponsors brought 159 new strategies to market, and ended the year with 178 new product rollouts. The industry is currently about 40 funds away from matching that mark with two months to go.

The ETF market is still very much in an expansionary mode. After seeing net asset inflows of a record $188 billion last year, some like ConvergEx’s Chief Market Strategist Nick Colas are projecting asset inflows to amount to as much as $220 billion this year thanks to the Federal Reserve’s easy money policy that’s fostering generalized investor confidence in the markets.

“Market participants will buy risky assets as long as the Fed continues to buy bonds,” Colas told IndexUniverse in a recent interview. “There is definitely a risk-on type of mentality, and that’s been very positive for ETF flows this year.”

Total U.S.-listed ETF assets recently exceeded $1.6 trillion for the first time.

The flip side of launches is closures, and there too, 2013 is coming in with a smaller number. So far this year, 55 strategies have been shuttered, or slightly more than half of the 94 closures tallied for all of 2012.

Some argue that the slower launch/slower closure rates are positive signs of a maturing industry that has already tapped into broad themes extensively, and is unwilling to clutter the pipeline with me-too strategies.

It’s worth pointing out that according to IndexUniverse’s ETF Analytics, more than a fifth of ETFs in the market today are under high-closure risk based largely on asset levels. Most of them have less than $15 million in assets under management.

But as IndexUniverse’s ETF analyst Spencer Bogart recently pointed out in a blog, “The good news is that for each high-closure-risk ETF out there, there is almost always a larger, more viable product available to suit your investment needs.”


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