?? Numerous theme funds launched
?? ETF trend also arrived in Europe
ETF record in US trading
2021 was all about ETFs. As of December 20, a total of 445 new exchange-traded funds have been launched in the US since the beginning of the year, Bloomberg reports. The range of ETFs was thus expanded by 19 percent compared to the previous year – at the same time around 900 billion US dollars flowed into the market. A new record, as the agency writes. It is also noteworthy that the financial products are increasingly staying on the market and are only rarely closed again. “From a generational standpoint, there’s a lot of money being transferred,” Keith Buchanan, portfolio manager at Globalt Investments, told Bloomberg about the hype. “The stars are right now for the ETF industry to a) develop very quickly and b) absorb cash flows.” The strong growth in the industry is also reflected in the fact that almost 25 percent of the currently tradable US ETFs are less than two years old.
More actively managed ETFs launched
According to information from the agency, exchange-traded funds were particularly busy in September. A total of 70 new ETFs made it into trading in the ninth month of the year – that’s an average of three per trading day. But a trend can also be seen over the year: As Bloomberg further reports, 298 of the newcomers are actively managed, while the other 147 ETFs are passive. This is also a new development on the market. “ETF means passive for most investors,” confirms Allison Bonds, head of private wealth management at State Street Global Advisors. “Now more advisors are realizing that ETFs are no longer just about passive exposure, but that active ETFs, particularly in the fixed income space, make sense because they provide exposure to experienced bond managers.”
Two new ARK Invest ETFs
A prominent example of an ETF issuer that relies primarily on actively managed funds is the investment company ARK Invest. Since 2014, founder and managing director Cathie Wood has been regularly launching ETFs that reflect specific sectors. One of the flagship investors is the ARK Innovation ETF, whose largest holdings include shares in Tesla, Roku and Teladoc. In 2021, Wood then launched two new financial products. While the ARK Space Exploration & Innovation ETF maps companies that are active in the space sector, investors can use the ARK Transparency ETF to invest in companies that are considered to be particularly transparent. Although Woods ETFs have recently been criticized for their low returns, the market expert expects her funds to make substantial profits over the next five years.
ETF market specifies itself
However, as Bloomberg writes, Wood is not alone with the strategy of offering ETFs on specific topics. The trend is towards thematic ETFs that reflect individual sectors or areas, including automation or e-vehicles. Themed funds attract small investors in particular, which is why the ETF market is also experiencing a strong generational change. “If you look at the dynamic with which these investments are being made in retail, it’s no longer the grandma but the grandson in the basement,” adds Buchanan. “And they are interested in completely different things than their grandparents.” The ETF range also shows the increasing demand for financial products that meet the ESG criteria, i.e. environment (environment), social aspects (social) and sustainable corporate management (governance). In the USA, for example, more than 30 ETFs that meet the sustainability criteria have found their way onto the market in 2021. However, there is also more diversification within the industry, the agency continues. 56 new ETFs alone invest in derivatives.
Equity ETFs are also becoming increasingly popular in European trading
And the ETF trend has also arrived in Europe. As early as January 2021, the market for exchange-traded index funds reached one trillion euros, as the “Handelsblatt” reported at the time, citing the data provider Refinitiv. “This first estimate from the end of January reflects the good stock markets during the month and the new investments,” Refinitiv fund expert Detlef Glow told the daily. Between January and mid-December, investors pumped another 151 billion euros into ETFs, according to data from the Morningstar fund agency, which is available to the newspaper. 72 percent of the inflows related to equity ETFs, while 23 percent represented bonds. Only five percent referred to other ETFs such as commodity funds. For comparison: in 2010, investors still put a total of 34 billion euros into the market for exchange-traded funds. “2021 was also a very good year for the stock markets,” says Envestor analyst Ali Masarwah. In Europe, too, ETFs are being used more and more by private investors. “For many private individuals, this is a perfect solution for their own provision, and there is still a lot of room for improvement in this area,” the expert told the Handelsblatt with conviction.
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