Despite rocky market, ETF launches for retail mavericks roll on

Wild market gyrations fueled by Donald Trump’s tariff war aren’t stopping issuers from rolling out a fresh crop of exchange-traded funds — many aimed squarely at investors with a taste for speculation.

While animal spirits are on the wane across Wall Street, financial innovation in the ETF industry shows no sign of letting up: Issuers have minted an average of 75 new funds per month this year, versus 59 in 2024, according to data compiled by Bloomberg Intelligence. April alone has seen 63 ETF debuts along with dozens of fresh filings. This mix includes leveraged bets on Exxon Mobil Corp., thematic vehicles tracking nuclear energy and a fund that seeks to profit from an exotic arbitrage play on Michael Saylor’s Bitcoin juggernaut Strategy.

Driving the new product press are hopes that the speculative fervor among volatility-loving day traders will continue burning bright, even as stock selloffs and recession angst quench risk appetite in broader markets. The S&P 500 is down 11% from its February peak and has whiplashed investors with wild swings this month. The Cboe Volatility Index, known as Wall Street’s fear gauge, hit its highest level since 2020 earlier in April. 

“The ETF industry is always opportunistic,” said Todd Sohn at Strategas. “The more challenging question going forward is: what solutions are actually needed for investors, and what is fluff?”

The range of new funds reflects a broader identity shift in the $10 trillion US ETF market, which continues to churn out time-honored passive stock and bond strategies along with increasingly speculative products. Not all of the offerings were in the high-risk category, with an iShares global small-cap ETF and an India-focused fund from Goldman Sachs among the new filers. 

The other side of the spectrum includes a range of products that use derivatives to create leverage and magnify the moves of an underlying asset. Such funds can boost investors’ performance but also deliver devastating losses if a trade goes the wrong way.

Among the quirkier offerings are a pair of filings from Defiance ETFs. A Defiance product focused on Saylor’s Strategy would simultaneously take short positions on two separate ETFs tracking the Bitcoin proxy’s shares — one with daily leveraged long exposure and the other with daily leveraged short exposure, according to its filing.

The goal, according to the prospectus, is to profit from so-called volatility decay, or the propensity for returns to erode over time due to daily rebalancing. Defiance also filed to launch a fund applying a similarly high-risk strategy to triple-levered and triple-inverse ETFs tracking the Nasdaq 100.

Among recent filings, the double-short funds are “the most innovative from both an investment and structural perspective,” said Henry Jim, an analyst at Bloomberg intelligence. “Back in the old days, this was something like an arbitrage trade.” 

Companies also breathed life into various other Bitcoin-focused products — including a “premium income” fund and a capped Bitcoin ETF. The largest cryptocurrency has rallied 14% in April after tumbling earlier this year.

The new funds also include a proffering from Toews for hedged index ETFs, a proposal for an “international monopolies and moats” fund from Tema, and a filing for a Japan small-cap active ETF by MUFG, a Tokyo-based bank.

The spate of exotic funds is “a bit of a new paradigm,” said Mark Hackett, chief market strategist at Nationwide. “Levered ETFs do have some unintended risk, however, as there is some significant concentration in certain asset classes.”