New ETF launches may outpace 2021 surge on single-stock offers

REELING from a first half that saw the ETF market shrink by about US$1 trillion, fund issuers may get a lifeline from a new class of products and a potential rebound in financial markets, Bloomberg Intelligence (BI) says.

Exchange-traded fund (ETF) issuers, who introduced new products at a rapid pace to start the year, saw filings drop by half after Russia's invasion of Ukraine roiled markets, essentially finishing the first half flat. But there's optimism that filings and listings can stage a comeback in the second half of 2022.

ETF filings in the US fell 2.6 per cent in the first half of 2022 from the year-earlier period, to 295, while listings rose 8.5 per cent to 204, according to data compiled by Bloomberg Intelligence. For the whole year, ETF listings have scope to surpass 2021's level - especially after the first single-equity ETFs launched last week, BI says.

However, new offerings also bring the threat of fund closures if markets don't turn a corner. BI data show that there have been nearly 5 launches for every ETF closure since the start of 2021 - a ratio that's more than double the historical average.

The S&P 500 Index is down about 18 per cent this year, and while ETF launches tend to adapt to the prevailing environment, riskier strategies may continue to lose favour during a prolonged downturn.

"We may see more downside-protection or income-generating ETFs," BI analyst Athanasios Psarofagis said via email. But on the flip side, other strategies may be harder to sell. BLOOMBERG