At the beginning of 2021, the New York Stock Exchange made five bold predictions for active ETFs in 2021:

So where are we at the halfway point of 2021? Assets have grown to $263.8 billion. Well within striking distance for the second half. Full year cash flow has nearly surpassed a record 2020 with $58.5 billion year-to-date. Might as well call this a lock. The industry welcomed seven new active ETFs from three separate issuers via conversion from legacy mutual funds with combined assets of $28.8 billion. Based on the pipeline of public conversions this will come down to the wire. 23 new active semi-transparent assets came to market in the first half and assets stand at $1.8 billion. # of new ETFs are a lock and total assets seems likely. Lastly, ARK Invest ended the first half with $49.5 billion in assets. Might as well call this a lock as well. Morale of the story, maybe we weren’t bold enough.

Beyond our bold predications there are three additional stats from the first half that stood out to us:

The actively managed ETF industry grew across all asset classes through the first half. Equity flows continue to be the story of the industry, leading the way with $31.2 billion. Thematic ETFs (i.e., Innovation, Robotics, Future Health, etc.) dominated flows with over $18 billion, followed by large cap core and dividend focused style ETFs as well as ESG strategies. Fixed income flows, $20.2 billion, fell into second for the first time in the last half decade. With flows favoring high yield and senior loan portfolios as well as ultra and short-term ETFs. Quietly commodities, $6.6 billon, are experiencing a renaissance led by broad commodity strategies. Year to date commodity cash flow is more than two times greater than the prior three full year combined.

At the issuer level, ARK Invest continues to pace the industry with $15.5 billion in new flows. Behind them sits First Trust with $6.3 billion largely spread across their fixed income, preferred stock and commodities lineup. Rounding out the top five for the first half are JPMorgan ($5.8 billion), State Street ($4.2 billion) and Blackrock/iShares ($4.2 billion). Note that Dimensional/DFA’s conversions were excluded from the list as new cash flow, if included they would vault to number one with over $29 billion in converted and organic flows. Collectively, the top five issuers accounted for 60% of cash flow -- 10% lower than at the end of 2020.

Across the industry, nearly 90% of issuers experienced positive cash flow during the first half and nearly 40% saw inflows exceeding $100 million. Just outside of the top five, Invesco ($2.65 billion), American Century ($2.63 billion), Quadratic ($2.60 billion), Dimensional/DFA ($1.36 billion) and Amplify ($1.34 billion) all surpassed the $1 billion cash flow mark. Other notables included AdvisorShares ($0.97 billion, 3x 2020 flows), Horizon Kinetics ($0.59 billion, first time issuer & 2021 entrant), KraneShares ($0.43 billion, 2020 entrant), and Simplify ($0.37 billion, first time issuer & 2020 entrant). All told, 55% of issuers experienced more cash flow in the first half than through all of 2020.

At the product level, nearly 75% of active ETFs saw positive flows in the first half and 130 experienced flows over $50 million (often viewed as a break-even measure for an ETF). Additionally, unlike the broader ETF industry those ETFs priced at the lowest range aren’t dominating flows. Year-to-date ETFs priced at or above the active ETF market average of 0.52 bps secured 66% of the flows.

This pricing dynamic is likely one of the factors contributing to the accelerated pace of active launches relative to passive. Through the first half of the year 127 active ETFs launched or 61% of all ETF launches. At this pace the industry will easily break the 2020 record of 167 active launches.

As the industry enters the second half of the year, we will be keeping our eye on how distribution dynamics are evolving across the industry, the growth of semi-transparent stratigies and potential for expansion into new asset classes as well as the overall launch pace and adoption of active ETFs.

First Half Launch Monitor