Investors and advisors are turning to exchange traded funds to access market segments and customized strategies, and the ETF industry has responded by expanding on their existing product lines with even more specialized offerings that promises to fill every nook and cranny of the marketplace.
“Asset managers seek to gather assets by launching new products, in both ETF and mutual fund wrappers,” Todd Rosenbluth, S&P Global Market Intelligence Director of ETF & Mutual Fund Research, said in a note. “While there are some that will fail to gather assets, and likely be closed down the road, some will succeed. However, investors need not be fearful of the variety of choices.”
More and more ETFs are hitting the market. Seeing the rise in popularity for the passive index-based investment vehicle, ETF providers have expanded on their lineup while other money managers are jumping into the industry.
SEE MORE: Disappointing Active Strategies Help Put Focus on Passive ETFs
According to the Investment Company Institute data, ETFs accumulated $246 billion in net inflows between September 30, 2015 and August 17, 2016. Meanwhile, investors redeemed $191 billion from mutual funds, revealing their increased dissatisfaction with underperforming and high cost active strategies.
[related_stories]While the ETF industry has quickly expanded on its success, ETF providers have not been as prolific in launching new products as traditional open-end fund managers. According to S&P Global Market Intelligence, 219 ETFs launched since the end of August 2015, whereas 878 mutual fund share classes launched between August 31, 2015 and February 17, 2016 – mutual funds need to be six months old before entering the S&P Global Market Intelligence database, so Rosenbluth added that there may be even more new mutual funds.
However, Rosenbluth said that many of the new ETFs and mutual funds have not gather a lot of interest from investors. Notably, previous home-run strategies like currency-hedged ETFs are losing momentum as the dollar weakened against major global currencies this year while minimum volatility products outperformed.
SEE MORE: Best New Breakout ETFs of 2015
Rosenbluth, though, pointed out that there are have been some standouts among the newer launches, including the Goldman Sachs ActiveBeta U.S. Large Cap Equity ETF (NYSEarca: GSLC), which has gathered close to $1.2 billion in net inflows. GSLC incorporates a multi-factor indexing methodology based on value, quality, low volatility and momentum characteristics.
The SPDR S&P North American Natural Resources ETF (NYSEArca: NANR) has quickly attracted $862 million in assets after only launching on December 15, 2015. NANR tracks the S&P BMI North American Natural Resources Index and holds large positions in some of the most downtrodden U.S. sectors, including materials and energy.
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