The Growth in Number of ETF Strategies Also Hit a Record in 2021

Along with attracting record inflows in 2021, the exchange traded fund universe also enjoyed a record expansion in total number of offerings last year as well.

According to Morningstar data, a total of 1,503 ETFs and exchange traded commodities were launched in 2021, compared to the previous record of 873 recorded in 2018, the Financial Times reports.

Meanwhile, 264 ETFs were liquidated or shuttered, which was lower than the 510 closed down in 2020 and the lowest number of removed products since 2014, when the industry was only a fraction of its current size. The low closure rate also translated to net growth in the ETF count to 1,239, or almost twice the previous record of 656 set in 2010.

The boom in listed ETF offerings also came when the ETF industry attracted over $1 trillion in net inflows for the calendar for the first time over the course of 2021, bringing the total assets under management to over $10 trillion.

“The market and the [ETF] structure just seems to be getting hotter as a destination for money,” Eric Balchunas, senior ETF analyst at Bloomberg Intelligence, told the Financial Times.

“[In the U.S.] flows were 80 per cent beyond their old record last year and launches 60 per cent. That is definitely correlation/causation,” Balchunas said, adding that the strength of both flows and net ETF launches were driven by strong financial markets.

Kenneth Lamont, senior fund analyst for passive strategies at Morningstar, also highlighted varying drivers that backed the specific launches in different markets.

“In Europe most new launches have been ESG [environmental, social, and governance] and/or thematic. In the US, the story is different where more than half of launches have been active ETFs,” Lamont told the Financial Times.

Last year also stood out for the lower number of shuttered ETF strategies, especially in the second half of the year when only 102 ETFs closed down.

Balchunas attributed the sticking power of ETFs to markets being “so agreeable last year, borderline utopia,” with the S&P 500 rising 27% over 2021. In the U.S., 70.4% of ETFs brought in money over 2021, according to Bloomberg data, the highest percentage in the modern era.

“It wasn’t just the one thing that was working,” Balchunas said. “It was almost like the fish were jumping into the boat last year. It was just such a favourable year that there was no reason to close anything.”

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