Analysis-ETF debuts set to break 2021 record as active-fund issues jump

investing.com:

By Suzanne McGee and Bansari Mayur Kamdar

(Reuters) — Issuance of new exchange-traded funds (ETFs) in the U.S. marketplace is on track to hit a record high in 2023, as asset managers rush to launch actively managed funds in response to rising interest rates and market volatility.

As of last week, Morningstar Direct calculated that 391 new ETFs had begun trading in 2023. That's significantly higher than the 311 that had debuted by the final week of October in 2021, the year ETF launches set a record of 475.

«We have historically observed an increase in the number of launches from our clients in the fall, as activity picks up following the summer months, and in advance of year-end,» said John Hooson, managing director for ETF Product at BBH.

«We are seeing that phenomenon become a bit turbocharged in 2023, as new products are rolled out in response to current market conditions – namely, rising rates and market volatility.»

The U.S. Federal Reserve had raised interest rates to multi-year peaks before pausing last month, with geopolitical shocks and fears about rates remaining higher for longer roiling markets.

Since late September, asset managers have been rolling out new products at a frenetic pace, with weekly totals double or treble the longer-term pace of eight or nine new ETFs.

Last month, ETF debuts set a monthly record of 69. So far in October, the total stands at 47, according to Morningstar Direct data. The final number for October will almost certainly be higher, analysts said.

Most of the trends that have fueled explosive ETF growth in recent years are expected to remain intact heading into 2024.

Bryan Armour, ETF analyst at Morningstar, said that much of the impetus is coming from asset management companies