Is This the End of the Beginning of the ETF Boom?
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Tuesday, April 5, 2016

Is This the End of the Beginning of the ETF Boom?

We may be at an inflection point in the ETF industry ... and maybe it's just been a rough couple of quarters.

Dave Nadig
Director of Exchange Traded Funds
The rate of new ETF launches plummeted last quarter, according to FactSet data reported on by the Wall Street Journal, to their lowest level in two years. And assets and flows (especially flows) remain highly concentrated among a few ETFs. Yet the total number of ETFs offered in the U.S. rose to 1,860 at the end of Q1 2016, up 10 percent year-over-year.

43 new ETFs launched in the U.S. in the first quarter of 2016, per FactSet. That's down 39 percent from Q4 2015 (70 launches), down 52 percent from Q3 2015 (90 launches, the peak quarter so far), and down 26 percent year-over-year (58 launches in Q1 2015).

Yet the current ETF launch pace still looks fast if you look back a little further; it's still more than double the launch rate from three years ago, when just 21 new ETFs debuted in the U.S. in Q1 2013. Though trending upward since Q1 2013 (the earliest FactSet data provided in the WSJ article), the pace of ETF launches has varied wildly from quarter to quarter.

"There's no question all the easy ideas are gone," Dave Nadig, head of ETFs at FactSet, tells the WSJ.

Here's how concentrated the ETF business is. Last month (that is, March 2016), ETFs in the U.S. brought in $36.8 billion in net inflows. That's the biggest monthly net inflow number in FactSet's data, which goes back to September 2010. And about three-quarters of that recordbreaking amount flowed into just 20 ETFs.

ETF assets are also concentrated, although much less so. Per Morningstar data cited by the WSJ, about three-quarters of ETF AUM is in the 100 biggest ETFs.

The article also features input from three ETF boutique bigwigs: Dan Ahrens, chief operating officer of AdvisorShares [profile]; Andrew Chanin, CEO of Pure Funds; and Darek Wojnar, managing director at Lattice Strategies.

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