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2020 ETF Launches Looked Very Different

Posted by Michael Venuto on Jan 20, 2021 8:30:00 AM
Michael Venuto
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In 2020, ETFs broke asset raising records, as noted by Sumit Roy at ETF.com.

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Like everything else in 2020, the growth of the ETF industry looked quite different from other years. In this ETF Think Tank research note, we look at the 284 ETFs launched in the US last year that raised, in aggregate, about $18.5 Billion in AUM. We note, as predicted by our ETF Professor, that a majority of the launches focused on innovations and active management as outlined in Dan Weiskopf’s white paper: Measuring Innovation in the ETF Industry. Below, we explore the class of 2020 ETF launches and the differences with the overall landscape of US listed ETFs with data provided by the ETF Think Tank Security Master.

The ETF Halo

The ETF launches of 2020 look very different from the low-cost beta incumbents that currently command the bulk of the assets. For example, in 2020, there were only 5 sector ETFs launched compared to 48 Thematic ETFs. As noted in our ETF Industry KPI report, there were also a lot of new sponsors:

Lastly, as for the number of ETFs and brands, the number of ETF brands surged from 141 to 170 at year-end, although the number of ETFs stayed about the same. We can derive that more institutions and companies are creating ETFs…

As many new sponsors embrace the benefits of the ETF Halo/Structure, we note two trends that dominated 2020 launches: Active ETFs and Option-Based Structured Outcomes.

Active Gets Really Active

The charts below compare the investment approach of 2020 launches to the overall ETF industry.

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Active ETFs represent 56% of 2020 launches while Traditional Index based ETFs were only 7%. Non-Traditional Passive (Smart Beta) won the race in terms of new launch asset gathering. These Non-Traditional index funds control 28% of overall ETF AUM, but the class of 2020 took in 46% of the new launch AUM. Active was also impressive at 42% of new launch AUM.

New Options in 2020

There is no doubt that 2020 marked a change in investment approach, but the change in category launches may be even more extreme as depicted in the chart below:

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The launches of 2020, relative to Equities and Fixed Income, look pretty normal with just a slight decline in both launches and AUM. The major change is the reduction of Geared (Leveraged/Inverse) ETFs with the simultaneous rise of options-based structured outcome ETFs. In 2020, options-based ETFs accounted for over 21% of launches and 18% of new launch AUM, a significant increase from past years. When looking at the overall industry, this category only represents 5% of listings and 0.21% of AUM.

 

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