What You Need to Know
- 2022 is expected to be another record-setting year for launches and fund flows.
- Actively managed ETF launches are expected to overpower passive ETF debuts.
- RIAs are seen introducing their own ETFs, based on their proprietary investment models.
2022 is expected to be another boffo year for U.S. ETFs, with even more launches and greater fund flows than 2021, a record-setting year.
Four hundred forty-five new ETFs launched in 2021 as of Dec. 20 compared with 309 in 2020, and ETFs collected about $800 million in net new fund flows — more than two and a half times the flow into mutual funds, according to Morningstar data.
About 60% of the ETF launches were actively managed in the conventional sense, but if one includes all factor and thematic ETFs, the percentage jumps to about 87%, said Ben Johnson, director of global exchange-traded fund research at Morningstar.
Hundreds More ETFs Will Launch
He and other fund analysts expect hundreds more ETFs will launch in 2022 and the majority will be active. “There is no white space left in traditionally defined passive products,” said Johnson. “We don’t need another total return international developed market cap-weighted index ETF or another S&P 500 index ETF.”
What investors need instead are ETFs that suit today’s uncertain markets, according to Michael Loukas, CEO of TrueMark Investments. “If efficient markets lend themselves to passive strategies then inefficient, uncertain markets lend themselves to active ETFs.”
“We think 2022 will be an even more successful year for active managed ETF asset gathering than 2021 has been,” wrote Todd Rosenbluth, head of ETF and Mutual Fund Research at CFRA.
Some of the new active ETFs could be ETF conversions, which happened for the first time in 2021 when Atkinson Asset Management converted two mutual funds to ETFs. Others will be clones or close cousins of existing mutual funds or entirely new products.
“To launch and not to convert will continue to be the preference of many asset managers,” Johnson said.
In 2022, Capital Group, which has over $2 trillion in assets, will be doing just that, introducing ETFs for the first time, as will Neuberger Berman, both joining legacy firms like Putnam Investments and Dimensional Fund Advisors, which entered the ETF universe within the last year or two.
The Security and Exchange Commission’s SEC ETF Rule 6c-11, adopted in mid-2019, helped pave the way for ETF launches from established mutual fund companies by eliminating the requirement that asset managers file for exemptive relief every time they launch a new ETF and allowing all transparent ETFs to make use of custom baskets.