We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
4 ETF Categories That Have Gained Prominence Past Year
Read MoreHide Full Article
Over the past two decades, the U.S.-listed ETF industry has evolved and recorded immense growth. As of the end of May 2023, there were approximately 3,100 ETFs listed in the United States, collectively holding $6,987 billion in assets.
In the early 2000s, passive and plain vanilla ETFs like (SPY - Free Report) and (QQQ - Free Report) referencing the S&P 500 and Nasdaq 100, respectively, used to rule the market. These broad-based ETFs made up about 90% of the total assets under management (AUM) during that time. Now, however, uniqueness in offerings is in demand.
Currently, broad-based ETFs make up approximately 33% of total ETF assets, while U.S.-listed ETFs tied to international equity indices or securities or "International Equity ETFs" represent 17% of AUM, a considerable increase from the mere 3% in the early 2000s, per a J.P. morgan report.
Style-based ETFs constitute 20% of ETF assets compared to the previous 3% during the same period. Sector funds have increased from 5% to 8% of the total AUM. Fixed-income ETFs have shown strong growth in recent years, making up 20% of total ETF assets.
Over the past year, fixed income and broad equity funds experienced huge asset growth, while currency, commodity and sector equity funds saw declines in AUM year over year.
Thematic ETFs
Among many changes seen in the industry, the boom in thematic ETFs has been truly eye-catching.Thematic ETFs normally look to track companies that revolve around structural changes in society and economy, the rapid advancement in technology and effective uses of natural resources. For example, the recent public launch of generative AI/large language models triggered investor interest in potential beneficiaries of this technology and channeled huge inflows to AI-related themes.
J.P. Morgan estimated that YTD inflows into U.S.-listed AI-themed ETFs totaled about $1.2 billion (through Jun 16) — $1 billion of which was infused in the past month — taking the total AUM in AI-themed funds to nearly $8 billion.These funds posted a median 34% return YTD, strongly outperforming the S&P 500 (+15%).
Some thematic ETFs launched within a year are First Trust Indxx Aerospace & Defense ETF (MISL - Free Report) andiShares Lithium Miners and Producers ETF (ILIT - Free Report) . Most recently, a fund called MUSQ Global Music Industry ETF (MUSQ) has been launched.
Smart-Beta
The ‘smart beta’ frenzy has taken the ETF world by storm in recent years with regular introductions of factor-based products. As the name suggests, this approach calls for a strategic take on portfolio construction rather than a market-cap-oriented method. The approach helps exploit market anomalies by incorporating additional selection criteria to the market cap or rules-based indices.
Some of the thematic ETFs launched within a year are iMGP Berkshire Dividend Growth ETF (BDVG - Free Report) and VictoryShares Free Cash Flow ETF (VFLO - Free Report) .
International ETFs
The year 2022 was terrible for the global markets. High inflation, rising rates, geopolitical tensions and supply-chain woes due to the zero-Covid policy in China had made matters most difficult last year. Still, some international economies fared better thanks to the commodity rally.
While 2023 ushered in huge gains for Wall Street, some international economies, like Eurozone, topped the S&P 500. Relatively lower rates and corporate strength probably led to those gains and inspired ETF issuers to come up with new products (read: 5 Country ETFs Beating the S&P 500 in Q2).
Putnam Emerging Markets ex-China ETF (PEMX - Free Report) and Matthews China Active ETF (MCH - Free Report) are some of the international ETFs launched in the past year.
Managed Risk/Defined Outcome ETFs
Over the past year, total AUM in the managed risk/ defined outcome ETF segment increased about 65%. About 60 new products were launched by over a dozen different issuers in the United States. This segment was also boosted by the SEC’s Derivatives Rule (18f-4), which was passed in 2020; the rule sets out leverage limits and risk management and recordkeeping requirements, but makes it easier for ETFs that comply with these to employ derivatives strategies, per the J.P. Morgan report. One of the recently-launched such ETFs is LHA Risk-Managed Income ETF (RMIF - Free Report) .
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
4 ETF Categories That Have Gained Prominence Past Year
Over the past two decades, the U.S.-listed ETF industry has evolved and recorded immense growth. As of the end of May 2023, there were approximately 3,100 ETFs listed in the United States, collectively holding $6,987 billion in assets.
In the early 2000s, passive and plain vanilla ETFs like (SPY - Free Report) and (QQQ - Free Report) referencing the S&P 500 and Nasdaq 100, respectively, used to rule the market. These broad-based ETFs made up about 90% of the total assets under management (AUM) during that time. Now, however, uniqueness in offerings is in demand.
Currently, broad-based ETFs make up approximately 33% of total ETF assets, while U.S.-listed ETFs tied to international equity indices or securities or "International Equity ETFs" represent 17% of AUM, a considerable increase from the mere 3% in the early 2000s, per a J.P. morgan report.
Style-based ETFs constitute 20% of ETF assets compared to the previous 3% during the same period. Sector funds have increased from 5% to 8% of the total AUM. Fixed-income ETFs have shown strong growth in recent years, making up 20% of total ETF assets.
Over the past year, fixed income and broad equity funds experienced huge asset growth, while currency, commodity and sector equity funds saw declines in AUM year over year.
Thematic ETFs
Among many changes seen in the industry, the boom in thematic ETFs has been truly eye-catching.Thematic ETFs normally look to track companies that revolve around structural changes in society and economy, the rapid advancement in technology and effective uses of natural resources. For example, the recent public launch of generative AI/large language models triggered investor interest in potential beneficiaries of this technology and channeled huge inflows to AI-related themes.
J.P. Morgan estimated that YTD inflows into U.S.-listed AI-themed ETFs totaled about $1.2 billion (through Jun 16) — $1 billion of which was infused in the past month — taking the total AUM in AI-themed funds to nearly $8 billion.These funds posted a median 34% return YTD, strongly outperforming the S&P 500 (+15%).
Some thematic ETFs launched within a year are First Trust Indxx Aerospace & Defense ETF (MISL - Free Report) andiShares Lithium Miners and Producers ETF (ILIT - Free Report) . Most recently, a fund called MUSQ Global Music Industry ETF (MUSQ) has been launched.
Smart-Beta
The ‘smart beta’ frenzy has taken the ETF world by storm in recent years with regular introductions of factor-based products. As the name suggests, this approach calls for a strategic take on portfolio construction rather than a market-cap-oriented method. The approach helps exploit market anomalies by incorporating additional selection criteria to the market cap or rules-based indices.
Some of the thematic ETFs launched within a year are iMGP Berkshire Dividend Growth ETF (BDVG - Free Report) and VictoryShares Free Cash Flow ETF (VFLO - Free Report) .
International ETFs
The year 2022 was terrible for the global markets. High inflation, rising rates, geopolitical tensions and supply-chain woes due to the zero-Covid policy in China had made matters most difficult last year. Still, some international economies fared better thanks to the commodity rally.
While 2023 ushered in huge gains for Wall Street, some international economies, like Eurozone, topped the S&P 500. Relatively lower rates and corporate strength probably led to those gains and inspired ETF issuers to come up with new products (read: 5 Country ETFs Beating the S&P 500 in Q2).
Putnam Emerging Markets ex-China ETF (PEMX - Free Report) and Matthews China Active ETF (MCH - Free Report) are some of the international ETFs launched in the past year.
Managed Risk/Defined Outcome ETFs
Over the past year, total AUM in the managed risk/ defined outcome ETF segment increased about 65%. About 60 new products were launched by over a dozen different issuers in the United States. This segment was also boosted by the SEC’s Derivatives Rule (18f-4), which was passed in 2020; the rule sets out leverage limits and risk management and recordkeeping requirements, but makes it easier for ETFs that comply with these to employ derivatives strategies, per the J.P. Morgan report. One of the recently-launched such ETFs is LHA Risk-Managed Income ETF (RMIF - Free Report) .