The number of new exchange-traded funds hitting the U.S. market is on track to set another record in 2024, according to data from Morningstar Direct, with an average of 50 ETFs making their debut monthly.
That compares to a monthly average of 48 in 2023, which was also a record, and 38 in 2022, the data show.
Steady growth in investor interest in the liquidity and tax advantages offered by ETFs, together with an influx of innovative products, underpin the growth, issuers and analysts say. Nor has recent market turbulence dented demand for the riskiest kind of new products, even as it has whetted investor interest in “buffer” ETFs that use options to guard against downside risk.
An example of the riskiest products is the Defiance Daily Target 1.75x Long MSTR ETF, which provides investors a way to leverage up their enthusiasm for bitcoin by offering 1.75 times the daily return on shares of MicroStrategy. The software company has used its cash reserves to become the largest single corporate owner of the cryptocurrency.
In the week since it launched, the ETF has attracted more than $50 million of inflows, according to VettaFi, while also becoming the most volatile ETF on the market, data from Interactive Brokers shows.
At the other end of the spectrum are products aimed at risk-averse investors.
“We’re seeing a strong pace of new products launching that offer some kind of focus on income or downside protection” using options, said John Hooson, managing director of ETF services at Brown Brothers Harriman.
One of the newest ETFs, the Amplify CWP Growth & Income ETF , made its debut on Thursday and features aspects of both approaches. The ETF offers investors exposure to large-cap growth stocks, while writing call options on some of those individual stocks to generate additional income.
Another trend is to launch products that form part of the same family or suite as existing successful ETFs, Hooson noted. On Tuesday, for instance, Pacer ETFs rolled out the latest addition to its line of income-based ETFs. The Pacer Nasdaq 100 Top 50 CashCows aims to deliver exposure to the 50 stocks in the Nasdaq index with the highest free-cash-flow margins, said Sean O’Hara, president of Pacer ETFs. Next: a Nasdaq 100 dividend ETF.
“It’s exciting because so many of these Nasdaq-listed companies will end up paying dividends,” O’Hara said.