The year 2024 has reportedly witnessed a record-breaking number of new exchange-traded funds (ETFs) entering the market, largely driven by active fund managers.
What Happened: According to Morningstar, 236 ETFs have been launched this year, including 166 actively managed ETFs. This is a significant increase compared to the total of 155 active and passive ETFs launched during the same period in 2023, the Financial Times reported on Thursday.
The new generation of active ETFs offers a range of features, such as additional income, double exposure to specific stocks, or guaranteed protection against losses, attracting substantial interest and investment.
Capital Group recently announced the addition of seven new active ETFs to its portfolio of 21 securities, which have a market capitalization of $29 billion, representing about 4% of the active ETF market.
Earlier this month, BlackRock, a $10 trillion asset manager, also launched a pair of new active ETFs, doubling its active ETF offerings over the past year.
A joint venture between REX Shares and Tuttle Capital Management plans to launch single-stock ETFs that offer bets for and against a range of companies, including Trump Media (NASDAQ:DJT) and meme stock favorites GameStop (NYSE:GME) and AMC Entertainment (NYSE:AMC), according to a recent regulatory filing.
Despite the $26 trillion mutual fund industry being significantly larger than the nearly $9 trillion ETF market in the U.S., active ETFs have attracted nearly $100 billion in the first five months of 2024, while active mutual funds have lost about $150 billion, as per Morningstar.
"You are seeing another step on the extinction of mutual funds for ETFs," said Matthew Tuttle, CEO of Tuttle Capital Management.
"The only thing mutual funds have on ETFs is a lead in active strategies."
Why It Matters: The surge in ETF launches, particularly those that are actively managed, reflects a shift in investor preference. Leveraged and inverse ETFs are gaining traction among traders seeking short-term market opportunities.
However, the market's higher neutral rate expectations could challenge bond ETFs, as a higher neutral rate may limit the Federal Reserve's ability to cut interest rates, possibly causing headwinds for bonds.
Additionally, the Securities and Exchange Commission is reportedly close to approving Ethereum (CRYPTO: ETH) Spot ETFs by July 4 after spot Bitcoin (CRYPTO: BTC) ETFs resulted in $8 billion in asset gains.
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This story was generated using Benzinga Neuro and edited by Pooja Rajkumari