Single-Security ETF Launches Put 2022 on Pace to Beat Prior Year

After a slow first half, the uptick in single-stock exchange-traded fund launches is positioning 2022 to outpace last year. 

Last year was a record-breaking one for ETF launches, and 2022 at first seemed to be off to an even stronger start. Then Russia invaded Ukraine in February and ETF rollouts came to all but a screeching halt for a week or so before picking up to a much slower pace.  

Spiking inflation and fears of recession were likely contributors to the slowed rate as the year went on.  

July was the slowest month of 2022 for ETF debuts, with only 23 launches, less than half the 49 that took place in July 2021. And at the end of the month, 2022 trailed the same time period in 2021 by more than 15 launches.  

With August more than halfway over, 2022 has edged out last year once again after the last few weeks were unusually active, with 31 launches as of today over the course of 17 trading days. There have been 259 launches so far this year, versus 257 by the same time last year, according to ETF.com data.  

Another Record Year? 

Thanks to single-security ETFs, which have been available to investors in Europe and made their U.S. debut this summer, we could be in for another record year of launches.  

The first eight single-stock funds rolled out in July from AXS Investments, representing more than a third of the total launches during that month. GraniteShares and Direxion launched their own versions in August, adding eight funds in all to the count for the month. The products use swaps to offer leveraged and inverse exposure to the performance of select highly liquid individual stocks.

However, it’s not just equities. F/m Investments also participated in the trend by launching a trio of ETFs midmonth that invest in a single Treasury security. The funds hold the most recently issued Treasury security in their targeted tenor until a new round is issued, which they then roll into.  

Single-security ETFs could very well push the number of launches for 2022 to another record level, given that there is a significant number of such products still in registration. There are at least a total of 66 leveraged and inverse single-stock ETFs still in registration. 

Among the early movers, GraiteShares has 16 single-security funds in registration, while AXS has 10. Direxion has 20 such products, and that’s not including the 20 in registration for a new brand known as Kurv.  

There are also seven single Treasury security ETFs in registration from F/m.  

And let’s not forget about the launch of the Innovator Hedged TSLA Strategy ETF (TSLH). Although it rolled out late in July, the fund looked to be a bit of a trial balloon. It offered hedged exposure to Tesla’s performance in the form of a downside buffer and capped upside return. Should it gather significant assets, it seems likely Innovator will apply the same methodology to other highly traded equities.  

Finally, Toroso Investments partnered with Zega Financial to file for 15 “option income” ETFs that will use an options overlay on a security to generate income while offering exposure to the security’s performance. The filings apply the strategy to 10 individual stocks and five popular ETFs.  

Contact Heather Bell at [email protected]