It may not feel like it, but it was just three years ago that the SEC adopted its new ETF rules, modernizing how the wrapper is regulated. The move had been a long time coming, taking the burgeoning ETF space to new heights. With ETFs launched that year hitting their crucial three-year milestones in 2022, investors should note some key takeaways from this crop of three-year mark ETFs.
AVANTIS ASCENDANT
Avantis Investors, part of American Century’s ETF arm, launched in 2019 with a suite of ETFs that have dominated their peers in flows. Three of the top five ETFs ranked by three-year flows are Avantis strategies; the Avantis U.S. Small Cap Value ETF (AVUV), the Avantis U.S. Equity ETF (AVUS), and the Avantis International Small Cap Value ETF (AVDV) take the first, third, and fifth positions, respectively.
Remarkably, all three Avantis ETFs are actively managed, with the JPMorgan BetaBuilders International Equity ETF (BBIN) being the lone passive strategy in the top five ETFs by three-year flows. In three-year returns, AVUV came second, returning 51%, only surpassed by the remarkable iPath Series B Carbon ETN (GRN), which returned 204% over three years.
AVUV, the largest gainer among passive and active ETFs launched in 2019, targets U.S. small-cap value stocks, using fundamental screens including outstanding shares, cash flow, and price-to-book value. All three of the Avantis ETFs lean towards value and smaller companies, privileging more defensive thinking. AVUV charges 25 basis points, seeing almost $4 billion in three-year flows.
ACTIVES STAKE THEIR CLAIM
Avantis’ suite of active ETFs weren’t the only active strategies to show passives how it’s done. Several other strategies focused on risk and volatility cracked the $1 billion mark for three-year inflows, underscoring how uncertain the last few years have been, from the pandemic to full-scale war returning to Europe.
The three ETFs, the Quadratic Interest Rate Volatility & Inflation Hedge ETF (IVOL), the RPAR Risk Parity ETF (RPAR), and the iMGP DBi Managed Futures Strategy ETF (DBMF) took $1.4 billion, $1.37 billion, and $1 billion in three-year flows, respectively. DBMF also stands out with the fourth-best returns over three years, returning 45.5% over that period.
Outside of the $1 billion tier, investors can find Innovator’s power buffer ETF suite adding to the trend of active investment strategies that protect investors from uncertainty while offering their various equity exposures. The Innovator U.S. Equity Power Buffer ETF – November (PNOV) took in $615 million over three years, returning 14.7% over the last three years, one of five Innovator strategies to take in more than $300 million since inception.
STICKY ICKY
Not all news was good news for three-year mark ETFs — five different cannabis strategies launched in 2019, all of which have struggled to perform over three years. None of the cannabis strategies saw returns greater than -55% over three years, with the Global X Cannabis ETF (POTX) returning -85.5% over three years.
While POTX did take in $239 million over three years in net inflows, that was the highest amount among all five ETFs, passive and active. Investors may have initially felt drawn to the growing legal availability of cannabis in states throughout the U.S., but that has yet to bear significant fruit in cannabis-flavored three-year mark ETFs.
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