Near Record Levels of ETF Listings in 2022

The second-best year for ETF flows

Inflows to ETFs reached more than $800 billion over the course of last year, making 2022 the second-best year of flows on record. This remarkable result, despite the broad-based market sell-off, highlights the continued popularity of ETFs among investors who, having seen both equities and bonds tumble in a year of extreme volatility, are seeking low-cost access to an ever-broader range of investment strategies. 

With equities and bonds suffering, each facing immense selling pressure in 2022, the plain-vanilla 60/40 equity/bond portfolio that succeeded through the baby-boomer era has been upended - opening the door for greater demand of alternative investment strategies from retail investors. 

And ETF providers responded accordingly, launching another record number of new funds. By 7th December 2022, 422 new ETFs had been brought to market (vs. 417 at the same time in 2021) with a large number of these outside the traditional stocks and bonds. This includes active ETFs, ESG ETFs, single-stock ETFs and ETFs with exposure to other asset classes such as commodities, real estate, and even cryptocurrencies. 

Some interesting new ETFs that highlight the broad diversity of new ETF issuances include:

• Sprott Uranium Miners ETF (URNM) – exposure to Uranium miners, a way for investors to play nuclear energy adoption
• God Bless America ETF (YALL) – an “anti-ESG” ETF
• Subversive Mental Health ETF (SANE) – an ETF providing exposure to companies that intersect with mental health.

The strength of ETF issuances is even more surprising given that we have seen the equity-raising market stagnate, with far fewer IPO’s and secondary equity raises in 2022. This means that public companies have not been listing on exchanges as much last year, which usually points to weak market conditions. The ETF market’s continued rapid growth trajectory despite this backdrop further underscores the great demand for ETF products as a whole.

It wasn’t a rosy year for the entire ETF market, however. There were more ETF closures in 2022, as well as ETF issuers right-sizing their offerings. Some examples include the closures of:

• Euclid Capital Growth ETF (EUCG)
• AI-Powered International Equity ETF (AIIQ)
• Direxion Daily Russia Bull 2X Shares (RUSL)
• Cannabis Growth ETF (BUDX)
• iPath Silver ETN (SBUG)

Looking under the hood – more active, ESG and single-stock ETF

In terms of new launches, 2022 saw greater prominence given to active ETFs. That is, ETFs employing actively managed investment strategies. While these funds come at a higher cost than traditional passively managed ETFs, they do provide investors with the opportunity to outperform the market using an exchange-traded vehicle.

ETFs with ESG attributes also proved popular on the new product schedule as, even in a year where returns have eroded, demand remains for responsible investing. New ESG ETF launches included:

• Xtrackers S&P500 Growth ESG ETF (SNPG)
• IndexIQ ETF Trust IQ Candriam ESG U.S. Mid Cap Equity ETF (IQSM)
• Thrivent ETF Trust Thrivent Small-Mid-Cap ESG ETF (TSME)

Lastly, a new class of ETFs were launched known as single-stock ETFs. These ETFs allow funds to target single stocks and place leveraged bets on these stocks. All told, greater than 25 single-stock ETFs were launched in 2022. Including leveraged plays on and against popular stocks such as Apple (AAPD, AAPU) and Tesla (TSLS, TSLL)

Implications for investors

What can we take away from this strong year for ETF listings?

1. ETFs are here to stay. ETFs have taken market share from mutual funds for many years, however many questioned if this trend would continue in a recessionary environment. In 2022, it seems like the answer is clear.
2. Innovation and cost reduction. ETFs started as passive investment vehicles, however we have continued to see a greater degree of innovation as more active ETFs and unique strategies have arisen. For those who invest in ETFs for passive exposure, the cost of these passive ETFs continues to fall.
3. Cleaning up ETF Lineups. Despite the high level of listings, there have also been closures as ETF issuers are right-sizing their roster of ETFs.

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.