February Month End KPI
Innovation Fueling Growth
Innovation is clearly accelerating in the ETF market in 2021. We see this in the AUM growth. AUM concluded February at $5.76 trillion up 5.55% YTD; but year over year AUM also increased a remarkable 37.5% or $1.57 trillion from $4.18 trillion last February 2020. ETFs as solutions to dynamic market conditions have also shown an increase. Revenue from actively managed ETFs now represent 10% of the $9.99 billion for the projected next 12 month Expense Ratio Revenues (ERR). A year ago this number was 6.6% of the $7.7 billion of the ERR; so while the average fee remains flat at 18 Bps there is evidence that pricing power exists for differentiated solutions that are active.
Active Flows & Performance
Year-to-date ETF net asset flows totaled $154 billion, pushing total U.S.-listed ETF assets above $5.71 trillion. Active ETFs now represent $203.56 billion, or 3.55%, of the total ETF AUM. There are more than 500 actively managed ETFs in the market, or 21%, of the total number of ETFs. The average fee for active is 47 Bps and the weighted fee is 52 Bps. ARK Invest, arguably the most successful active ETF sponsor, charges anywhere from 49 to 79 bps for its funds, and the firm saw nearly $40 billion in inflows in the past 12 months. Again, this is evidence that where alpha is delivered, flows will follow.
New Entrants are Active
Evidence of innovation is also reflected in the number of new issuers by brand embracing the ETF wrapper. Today there are 175 new brands competing for investor dollars – an increase from 144 a year ago. Price will always matter for some investors, but ultimately it is clear that the ETF market is adapting to new market conditions with active and/or alternative types of portfolio managers providing meaningful high active share and potential alpha.
Steady Launches, Closures Slow
The number of ETFs year over year has risen to 2,453 up from 2,327 at the conclusion of February 2020, and year to date is up 1.53%. This growth reflects a new equilibrium between the open/close rate which now stands at about 1. New launches over these past 12 months are 335 versus closures of 227. ETF product contraction is healthy for the ETF industry – an open/close ratio of .84 bottomed with 239 launches/284 closures in November 2020. This indicates a return to a healthy ETF market with the 12 month open to close ratio at 1.13 to 1, since innovation is flourishing while the culling of unsuccessful products has slowed.
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