Global ETF Launches Drop 29% This Year While Closures Jump

Global ETF Launches Drop 29% This Year While Closures Jump

The decline in new funds follows surge in creations that may have peaked in 2021.

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Reviewed by: Lisa Barr
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Edited by: Ron Day

Global ETF launches have dropped by almost 30% so far this year, as 2022’s market washout cut demand and investors concentrated their assets among a narrower pool of funds. 

According to London-based research firm ETFGI, the number of exchange-traded fund launches year to date fell to 1,508, down from 2,136 funds launched over the same period last year. At the same time, closures nearly tripled, jumping to 780 from 279. 

Launches are sagging following last year’s 20% drop in the S&P 500 and after a boom in new ETFs that saw records set in 2020 and 2021. The new funds and strong returns those years attracted record flows into ETFs, with global flows hitting $1 trillion in 2021.  

“Firms saw flows going wild, and wanted to capture that,” said Matt Bartolini, head of SPDR Americas Research at State Street Global Advisors. 

Another reason for the decline is the increasing difficulty new funds have in competing with existing products, according to ETFGI founder Deborah Fuhr.  

“The large funds are getting larger,” said Fuhr, who is a member of etf.com’s editorial advisory board. “There are 11,000 ETFs in the world, and 739 have over $2 billion in them. Those large funds have 82% of all ETF assets.”  

ETF Launches Still Outnumber Closures 

The decline in ETF launches doesn’t mean the industry is shrinking. The number of new ETFs still outnumber fund closures, and ETF assets ended July with a record $10.9 trillion.  

“We’ve not hit peak ETF, but we may have reached peak ETF launches,” Bartolini said. “We’re not going to hit those lofty numbers of 2021 again.”  

The earlier boom in new funds was partially spurred by the SEC’s 2019 “ETF rule” that simplified the issuance of active ETFs, which make up a large portion of all new funds. Also powering the rise in launches were multiple consecutive years of strong stock market returns from 2019-2021.  

Another factor causing concentration in the ETF industry is falling fees. Larger funds can still make a profit with lower fees, letting them undercut smaller funds. That lets them attract more fees and grow larger still, continuing the cycle. 

 

Contact Gabe Alpert at [email protected]           

Gabe Alpert is a former data reporter at etf.com with over seven years’ experience in financial journalism. He also previously contributed reporting and analysis to Barron’s Magazine, Investopedia and other publications.