ETF Launches Slow, Closures Jump

Fewer exchange-traded funds are launching this year and more are closing as market turmoil appears to cut investors’ appetites for risk. 

Through the end of October, 357 ETFs have launched, down from 383 during the same period last year, according to ETF.com data. So far this year, 116 ETFs have closed and 11 more are slated to do so. Last year, which included the most launches on record, with 477, a total of 79 ETFs closed. 

The slower pace of launches come as soaring inflation and interest rates diminish investors’ appetites for risk. The S&P 500 has fallen more than 20% this year, denting portfolios, while falling bond indexes mean safe havens are hard to find. At the same time, growth in the industry may be slowing after several brisk years, one analyst suggested. 

“It’s difficult to know, but it’s likely a combination of the market correction and higher competition/ saturation," Aniket Ullal, head of ETF data and analytics at CFRA Research, told ETF.com. 

New launches pushed the total number of ETFs on U.S. exchanges past 3,000. The ratio of passive to actively managed ETFs—about two passive for each actively managed fund—has remained about the same. 

ETFs registered blazing hot inflows during October, led by U.S. equity and U.S. fixed income ETFs. The month’s haul—$91.5 billion—was a new monthly record, edging past the inflows of $91.1 billion in March of this year and the $91.2 billion in November 2020.  

Largest Launches 

Only five of this year’s new ETFs have more than $1 billion in assets under management. All but one are actively managed. The $5 billion JPMorgan International Research Enhanced Equity ETF (JIRE) selects its holdings based on fundamental research and ESG criteria. The fund is one of the ETFs that J.P. Morgan converted from a mutual fund.  

The other three actively managed ETFs among the largest of this year’s launches are from Dimensional Funds, which relies on a methodology that prioritizes the selection of smaller cap stocks offering exposure to the value and profitability factors. Those funds and their assets under management are as follows: 

• Dimensional US Marketwide Value ETF (DFUV), $7.9 billion 
• Dimensional International Core Equity 2 ETF (DFIC), $1.4 billion 
• Dimensional US High Profitability ETF (DUHP), $1.1 billion 

DFUV is the one ETF in the trio that converted from a mutual fund wrapper.  

The Goldman Sachs MarketBeta US 1000 Equity ETF (GUSA), which has $1.6 billion in assets, tracks a plain vanilla index of 1,000 large cap stocks.  

Contact Heather Bell at [email protected]