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Thursday, June 29, 2023

Strategic ETP Closures Outpace Launches By 80 Percent

News summary by MFWire's editors

The "strategic beta" (aka "smart beta") side of the ETF world shrunk a bit by two measures last year, despite record inflows.

The U.S. strategic beta exchange-traded product space included 615 ETPs on December 31, 2022, down 3.1 percent year-over-year, according to "A Global Guide to Strategic-Beta Exchange-Traded Products," a 59-page report that was released earlier this week by the Morningstar team. The report's authors include: Mo'ath Almahasneh, associate analyst for passive strategies, U.S.; Monika Calay, director of passive strategies, Europe; Jackie Choy, director of passive investment ratings, global; Kongkon Gogoin, senior manager research analyst for passive strategies, Australia; and Ryan Jackson, analyst for passive strategies, U.S.

The 2022 strategic-beta fund count drop was thanks to a sizable gap between strategic-beta ETP launches and liquidations in 2022. 25 such funds debuted in the U.S. last year, while 45 shut down.

"New product launches have ... slowed considerably," the M* quintet writes. "Closures have outnumbered launches in two of the past three years, a span that saw 136 strategic-beta ETPs shut down and the number of available products shrink by nearly 10% The past three years resemble a shakeout for a market that was — and may still be — oversaturated." Yet the U.S. still accounts for 44 percent of the total number of strategic-beta ETPs worldwide, the M* analysts write.

In terms of assets, U.S. strategic-beta ETPs brought in a record $148 billion in net inflows last year, the M* analysts note. Yet AUM in the space fell 6.3 percent in 2022 to $1.3624 trillion on December 31, 2022, thank to "widespread investment losses." Yet the U.S. still accounts for 89 percent of the total strategic-beta ETP AUM worldwide, the analysts note. 

Edited by: Neil Anderson, Managing Editor

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