Since the end of August 2015, nearly 220 exchange-traded funds have come to market. Some industry observers believe that number is too high.
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Just How Many?
They might have a point. Year-to-date, more than 70 ETFs have officially closed, and a recent string of announced closures will take that number to well over 80. That says the ETF business, as it continues maturing, is functioning like any other industry where end users of the product essentially dictate that product's viability.
While the number of ETFs coming to market is arguably high and perhaps indicative of too much of a good thing, the total number of exchange-traded products listed in the United States is just a fraction of the U.S. mutual fund population. That is also reflected in recent mutual fund launches, of which there have been plenty.
S&P Global Market Intelligence has research on 219 ETFs that launched since the end of August 2015 and is aware of filings from asset managers such as Fidelity to bring more to market. However, in contrast, there are 878 mutual fund share classes launched between August 31, 2015 and February 17, 2016; mutual funds must be six months old before entering our database and, as such, there may be even more new mutual funds, increasing the gap between the number of new ETFs and new mutual funds, said S&P Capital IQ in a note out Monday.
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An obvious result of so many new ETFs coming to market is that many will not initially be successful, making it easier to identify those that find rapid success. The SPDR S&P North American Natural Resources ETF (NANR) is a standout among new ETFs.
NANR And GSLC Take Center Stage
NANR, which primarily invests in energy and materials stocks, such as Exxon Mobil Corporation (XOM) and Newmont Mining Corp (NEM); NANR is ranked favorably for the valuation of its holdings. The ETF has $825 million in assets and a 0.35 percent expense ratio, said S&P Capital IQ.
That after coming to market in December. The Goldman Sachs ActiveBeta U.S. Large Cap Equity ETF (GSLC) is another example of an ETF that has found quick success. Still a few weeks away from its first anniversary, GSLC is home to about $1.2 billion in assets.
Competition clearly is not stopping fund issuers, ETF or mutual, from launching new product.
Despite facing competitive challenges, asset managers have continued to roll out new mutual fund offerings as well as to expand the available share classes of existing products, added S&P Capital IQ.
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