Boom in new ETFs defies saturation warnings

Boom in new ETFs defies saturation warnings
'Is this the year of the bond ETF? Certainly flows seem to be shouting that from the rooftops,' says VettaFi's Lara Crigger.
OCT 03, 2023
By  Bloomberg

Money management firms launched new exchange-traded funds at a rapid pace last month, shaking off fears that the $7 trillion industry is already overrun with low-cost investment vehicles.

Sixty-nine new ETFs came to market in September, making it one of the busiest months since at least 2016, data compiled by Bloomberg show. It was also the only month since September 2021 when there were more than 50 launches. 

A number of the new ETFs centered on the fixed-income market, though the list also includes international and commodities-focused funds. Matthews and Capital Group each rolled out five ETFs, while Brookstone Capital Management added eight to its lineup. 

“It’s just exhibiting the affinity investors have for ETFs and issuers coming to address those needs — from all across the capital markets spectrum, too,” Todd Sohn, ETF and technical strategist at Strategas Securities, said of the raft of launches. 

The newcomers — which spanned the spectrum of passive and active vehicles — are entering into an highly competitive space, with more than 3,200 ETFs already in existence. 

The rapid expansion has raised the question of whether the market is already too saturated with offerings, given that there are so many devoted to stocks, bonds and numerous tailored niches like investments in space or innovation. That means it’s far from certain that any new launches will attract investor attention or money. In fact, a number of companies have been culling their lineups, with some liquidating funds that launched during the pandemic’s stock-market heydays but failed to materialize meaningful flows. 

A slew of last month’s rollouts focus on the fixed-income market, with Dimensional and Capital Group among those that debuted short-duration ETFs. Such funds have drawn massive inflows this year, with ultra-short government bond funds — those with maturities of less than one year — seeing more than $30 billion come in as yields hold at high levels. 

“Is this the year of the bond ETF? Certainly flows seem to be shouting that from the rooftops,” Lara Crigger, editor-in-chief at VettaFi, said in an interview. “In terms of money going into the ETFs, it’s favoring short-term ETFs, ultra-short-term cash-like instruments.” 

Meanwhile, despite September's rocky stretch for markets, stocks are up this year. And such up markets tend to drive companies to put out more products, said Bloomberg Intelligence’s Athanasios Psarofagis. 

“Launches tend to mimic the market performance, slowing when markets drop and picking up when they rally,” he said. “The good run this year has brought issuers back.” 

Sam Bankman-Fried believes he can prove his innocence, 'SBF' author says

Latest News

Farther adds $120M firm with science-backed approach to wealth management
Farther adds $120M firm with science-backed approach to wealth management

The latest addition to the tech-driven firm combines wellness and finances.

Cutting back on fun: a third of Americans plan to reduce spending on vices
Cutting back on fun: a third of Americans plan to reduce spending on vices

Your clients are likely to be spending on vices, depending on their generation.

Gold continues to shine, but will jobs data change that?
Gold continues to shine, but will jobs data change that?

Traders are awaiting the latest snapshot of US economic strength.

Veritas could be about to snap up one of Wall Street’s oldest names
Veritas could be about to snap up one of Wall Street’s oldest names

Private equity firm reportedly in talks to make an acquisition.

Trump wants to scrap one of private equities' tax breaks, again
Trump wants to scrap one of private equities' tax breaks, again

Exemption enjoyed by PE and VC firms was under fire in his first term too.

SPONSORED Taylor Matthews on what's behind Farther's rapid growth

From 'no clients' to reshaping wealth management, Farther blends tech and trust to deliver family-office experience at scale.

SPONSORED Why wealth advisors should care about the future of federal tax policy

Blue Vault features expert strategies to harness for maximum client advantage.