2021 Has Been The Year Of ETFs, With 445 Debuting
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2021 Has Been The Year Of ETFs, With 445 Debuting

445 Exchange Traded Funds made their debuts in 2021, making it a record year for the $7 trillion industry.
Neither the author, Kingsley Alo, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

The US ETF industry witnessed an explosion in 2021 as 445 new products were listed. Data collated by Bloomberg shows that the sector known for its rapid growth went into overdrive in 2021. The rapid increase is attributed to new cash inflow from investors seeking an economic rebound from the effects of the pandemic. In contrast, equity mutual funds have since lost their appeal to the counterpart investment vehicle.

Source: Bloomberg

ETFs In 2021

Despite their limitations, the popularity of ETFs continues to soar. Since the beginning of 2021, almost $900 billion has come into the ETF market, setting a new record. The influx has increased the number of products available to American citizens by 20% since the end of 2020.

September was one of the busiest months for new ETF launches in history. No less than 70 new products came to the market, at an average of more than three per trading day. The pace has since slowed, yet 120 new funds were introduced in Q4. The specifics of the launches reveal a more detailed picture: 75 of the 445 new entrants are geared at fixed income. Also, for the first time, actively managed ETFs outnumber passive ones, with 298 debuts versus 147. 

A new trend that has emerged is the offering of thematic ETFs. These funds meet environmental, social, and governance requirements (ESG), with investors increasingly expecting more ethically responsible solutions. This year saw over 30 ESG ETFs debut in the US as retail investors popularised this asset class. At the same time, launches for low-cost, broad equity trackers have dwindled, making up just 8% of new funds in 2021.

Finally, funds have become more sophisticated as a result of specialization. This year, there have been 56 new ETFs that invest in derivatives to amplify bets or provide broader protection. The creation of defined-outcome ETFs, sometimes known as buffers, has been a significant driver of this. In exchange for minimizing losses, they strive to provide capped exposure to profits.

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Spot Bitcoin ETFs Still Facing Regulatory Difficulties

The Securities and Exchange Commission (SEC) has postponed its decision on Grayscale Bitcoin Trust’s petition for a spot bitcoin ETF. With over $45 billion in cryptocurrency assets, Grayscale announced its intention to transform its Bitcoin Trust into a spot Bitcoin ETF. After initially delaying its rulings, the markets regulator says that it now plans to consider Grayscale’s proposal by February 6.

The first-ever Bitcoin ETF finally started trading on the New York Stock Exchange in October. The fund offered by Proshares reached a market capitalization of more than $1 billion in its first 24 hours. Since then, several other Bitcoin ETFs have been traded on the NYSE; however, all of them are futures-based products.

The Grayscale ETF is not the only proposed fund facing further delay. Bitwise Asset Management Group, which also filled for a spot-based product, had their ruling date moved to February 1. Bitwise filed for a spot Bitcoin ETF on October 14 to provide exposure to Bitcoin rather than derivatives such as Bitcoin futures.

It also filed for a futures-based ETF, which was later canceled in November when several other similar funds gained approval. The successful launch of the Fidelity Spot Bitcoin ETF in Canada might make way for the SEC’s approval in 2022.

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Do you see ETFs continuing their rapid growth in 2022? Let us know in the comments below.

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