ETF Openings Break Yearly Record, As Closures Jump
From crypto to leveraged, the market is absorbing a wider range of funds, leading to more and faster closures, experts said.
A record number of ETFs hit exchanges this year thanks to a flood of new crypto and leveraged funds, while at the same time, the rush of new funds is sparking a surge in closures.
So far this year, 707 funds have begun trading, crushing last year’s record of 523, according to Bloomberg News. This year’s 179 closures ranks near the top annual tallies for funds shuttering, while still behind the record 223 that closed last year, the news agency said.
The number of funds opening and closing is soaring as markets surge, investors pour record amounts of money into exchange-traded funds, and the total number of funds tops 3,900, according to etf.com data. At the same time, issuers are creating new types of funds in hopes of gaining market share among investors as well as stealing customers from the mutual funds industry. Meanwhile, funds that fail to click with investors have shuttered.
The pace of closures and openings suggests an industry that is growing and seeking to accommodate new investors, said Aniket Ullal, head of ETF research at CFRA.
“Issuers are experimenting with different products and strategies to see what resonates with investors,” Ullal, a member of the etf.com editorial board, wrote in an email. “The rate of launches and closures reflects an industry that continues to be healthy and dynamic, although we could in the future get to a point of product oversaturation.”
Leveraged, Crypto ETFs Multiply
Investors for the first time ever poured more than $1 trillion into exchange-traded funds, and U.S. assets have topped $10 trillion for the first time.
So-called leveraged funds, which aim to multiply the return of an asset such a stock or commodity, have flooded the market to the point they are now the most-active traded ETFs on a daily basis after being barely visible 18 months ago.
Spot bitcoin ETFs were approved only last January and are the fastest-growing category in the industry’s history. Thirty-six trade currently and have pulled in more than $60 billion in investor money.
Unconventional, concentrated funds haven't always worked in 2024, said Ryan Jackson, Morningstar's senior manager research analyst. So-called thematic ETFs were among those not faring well this year, he said.
"As the amount of ETFs on the market expands there’s a likelihood that some wont hack it," he said. "ETFs aren’t a silver bullet for every crazy strategy."
