NYSE Active ETF Updates

Review of Q1 2023: Growing market share

As the ETF industry enters its 30th year and the active market enters its 16th year, the New York Stock Exchange made five more bold predictions for the active ETF market in 2023:

So how did we do through quarter one?

Beyond our bold predictions, there are three additional stats from the quarter that stood out to us:

The actively managed ETF industry grew across most asset classes through Q1 2023. Equity flows continued to be the story of the industry, leading the way with $22.2 billion. Investors favored domestic equity exposure (+$16.6 billion) to global (+$6.2 billion). Notably, ETFs that focused on core building block exposures, value and offered an options overlay led the way. Fixed income flows, $6.1 billion, rallied from a slow 2022 (+$8.4 billion). Investors demonstrated renewed interest in core/intermediate-term strategies and continued interest in short-term and CLO strategies. Alternatives, $0.04 billion, lost their record 2022 flow momentum. The combination of managed futures and real return strategies that were in vogue in 2022 experienced a more muted start to the year. Commodities continued a trend from the second half of 2022 with outflows of $1.3 billion.

At the issuer level, JPMorgan and Dimensional again positioned themselves to be cash flow leaders in 2023, taking in $8.7 billion and $7.4 billion, respectively. The two firms demonstrated leadership in different ways, as Dimensional had inflows into all 30 ETFs during the quarter while JPMorgan had two of the top three biggest cash flow winners of the quarter: JEPI (+$6.0 billion), JEPQ (+1.0 billion) and JPST (+$0.9 billion). American Century/Avantis (+$2.8 billion), Capital Group (+$1.8 billion), First Trust (+$1.4 billion), Putnam (+$1.3 billion) and Innovator (+$1.0 billion) rounded out the list of issuers with greater than $1 billion in cash flows for their actively managed lineups. American Century/Avantis and Capital Group both saw flows across their lineups into their broader market, lower cost actively managed ETFs. Notably, neither firm had an ETF with an outflow during the quarter. First Trust primary flows were across short duration and core fixed income along with a range of its defined outcome strategies. Putnam nearly cracked the top five for the first time with strong inflows into its equity and fixed income ESG ETFs. Innovator’s flows were largely driven by its US-focused Jan-March Power Buffer defined outcome strategies.

During Q1, over 65% of issuers experienced positive cash flows and nearly a fourth had cash flows in excess of $25 million. In addition to the seven issuers mentioned above, Janus Henderson (+$0.8 billion), Fidelity (+$0.8 billion), PGIM (+$0.5 billion), Amplify (+$0.3 billion) and AXS (+0.3 billion) all crossed $0.25 billion in net cash flows. These five issuers found varied paths to their success, from ultra-short fixed income (PGIM), dividend income (Amplify), AAA-rated CLOs (Janus Henderson), core fixed income (Fidelity) and single ETF/stock inverse (AXS).

At the product level, over 50% of active ETFs saw positive flows for the quarter and 114 experienced flows over $50 million (often viewed as a general break-even measure for an ETF). The industry’s asset weighted expense ratio stayed steady at 0.44% through the quarter. Nearly 80% of all cash flows went into ETFs with expense ratios below the industry average. In spite of this, only six of the 54 ETFs launched during the quarter offered an expense ratio below the industry average.

In the first quarter of 2023, 54 actively managed ETFs launched raising $2.8 billion in assets. Launches came from 34 different issuers, including six first-time issuers. ETF development continued to focus on equities with nearly 65% of new ETFs focused on the asset class. During the quarter, Putnam launched the most ETFs and also raised the most assets, totaling five and $0.8 billion, respectively.