It’s that time of year… a look back at some of my favorite ETF charts and pictures from a wild 2021. Enjoy!
2021’s Biggest ETF Story
SEC approval of the first bitcoin futures ETFs edges out record-smashing inflows for 2021’s ETF story of the year.
ETF story of the year?
— Nate Geraci (@NateGeraci) December 14, 2021
On August 3rd, SEC Chairman Gary Gensler opened the door to bitcoin futures ETFs with these comments:
ProShares didn’t waste any time, filing for a similar product on August 4th. Two months later, the ProShares Bitcoin Strategy ETF became the first bitcoin price-linked ETF to launch in the U.S. One note: Still. No. Spot. Bitcoin. ETF.
Record-Smashing ETF Flows
ETFs have taken-in some $900 billion this year, obliterating last year’s record of over $500 billion. Not only that, 2021’s total exceeds the best two-year calendar period combined inflows for ETFs!
Source: Mike Akins
First Mutual Fund to ETF Conversions
In January, Upholdings Funds became the first hedge fund to convert to an ETF. In March, Guinness Atkinson Asset Management blazed a trail by completing the first mutual fund to ETF conversion. The floodgates opened in June, with Dimensional Fund Advisors converting nearly $30 billion in mutual funds to ETFs. DFA has since converted additional funds and is now on the verge of becoming a top 10 ETF issuer. Other large asset managers including JP Morgan and Franklin Templeton are planning on conversions in 2022.
Source: ETF Hearsay
I’ll Have the ETF Wrapper, Please
Why are fund companies converting mutual funds to ETFs? Simple. Investors are demanding the lower cost, tax efficient ETF wrapper. In addition to mutual fund conversions, there has been an uptick in SMA to ETF conversions and RIAs launching proprietary strategies in an ETF format. The costs involved with bringing an ETF to market continue declining and white label issuers such as Alpha Architect are making it significantly easier for new entrants. Add in 2019’s ETF Rule which streamlined new launches and ideal conditions were in place for a bumper crop of ETFs in 2021. A record nearly 500 ETFs debuted this year.
Source: Morningstar’s Ben Johnson
ETFs to Monetize Social Influence
A noteworthy trend in 2021 was “social influencers” seeking to monetize their large followings by leveraging the ETF wrapper. Dave Portnoy (in a since deleted video) created a buzz when putting his social capital behind the VanEck Social Sentiment ETF (BUZZ). Ross Gerber, CEO of advisory firm Gerber Kawasaki and with nearly 200,000 Twitter followers, launched the AdvisorShares Gerber Kawasaki ETF (GK). Ross explained:
“One of the things that hit me in the last six months from my own experiences on Twitter is how much engagement I get from individual investors who want to engage with somebody like me, but they’re not necessarily looking for financial planning services.”
Source: Ross Gerber
Meme Stock Phenomenon
One of the year’s biggest ETF stories occurred back in late January. The Reddit crowd, led by “Roaring Kitty”, orchestrated a short squeeze in GameStop and sent shares of the video game retailer to the moon. GameStop’s weighting in the SPDR S&P Retail ETF (XRT) surged to 20% of the fund. XRT uses an equal-weighting methodology, with each holding targeted at approximately 1% of the ETF. That was no match for the Apes.
Source: Bloomberg’s Eric Balchunas
“If You Raise Assets in the Metaverse…”
The Roundhill Ball Metaverse ETF (META) launched in June and grew to about $125 million in assets by the end of October – a successful launch by any measure. As an aside, the index behind this ETF was created by Ball Metaverse Research Partners and Matthew Ball, who has nearly 95,000 followers on Twitter. In any event, in late October, Facebook announced a company name change to Meta. What happened next was reminiscent of the 2014 Sony hack and subsequent flows into the Cyber Security ETF (HACK). META’s assets jumped from $125 million to around $900 million!
Source: Bloomberg’s Eric Balchunas
BTFD… China Internet Style
It’s not often an ETF is among the worst-performing from a return standpoint and best-performing at taking in investor dollars. The KraneShares CSI China Internet ETF pulled off this remarkable feat in 2021, down 50% and with nearly $8 billion of inflows!
2020’s ETF Story of the Year
Last year’s biggest ETF story (by far) was ARK Invest, who dominated the performance leaderboard and ballooned from $3 billion to $35 billion in assets. Momentum carried into 2021, with performance starting strong and investors piling-in as ARK’s assets grew to over $60 billion! Since then? Well, the firm’s ETFs have significantly underperformed the broader markets and assets have shrunk back to $30 billion. As a matter of fact, asset-weighted returns across the entire ARK lineup are now negative.
Vanguard Vacuum Cleaner
While ARK assets have recently taken a hit, Vanguard continues vacuuming-up investor dollars. Vanguard ETFs have taken-in over $300 billion this year, shattering the previous single issuer annual inflow record of approximately $200 billion. Notably, a meaningful chunk of those assets are investors moving from Vanguard mutual funds to the ETF share class.
Source: Bloomberg’s Katie Greifeld
I Spy $400 Billion in Assets
In a year full of ETF milestones, it’s hard not to acknowledge the SPDR S&P 500 ETF (SPY), which became the first ETF to hit $400 billion in assets (now over $440 billion). SPY was also the first US-listed ETF back in 1993 and currently represents over 6% of all industry assets!
Source: ETF.com’s Dan Mika
Core = Bore
Vanguard ETFs and SPY are typically used for the core, boring part of portfolios. However, everyone likes a little sizzle. Enter thematic ETFs, which cover everything from blockchain to cannabis to disruptive innovation. Thematic ETF assets have grown from $50 billion at the end of 2019 to $160 billion as of October, a trend likely to continue in 2022.
Source: ETF Trends’ Dave Nadig
VOTE for Less Greenwashing
With the proliferation of ESG ETFs charging higher fees to look awfully similar to broad benchmarks, investment firm Engine No. 1 is taking a different approach. Following their successful activist campaign to claim three Exxon board seats, the firm launched the Engine No. 1 Transform 500 ETF (VOTE), which holds a portfolio of the 500 largest U.S. stocks and charges a microscopic 5 basis point fee. The difference? Instead of arbitrarily including or excluding companies from their fund, Engine No. 1 seeks to leverage shareholder voting power to influence board compositions and hold companies accountable for their approach to environmental, social and governance factors. The ETF has already taken-in $300 million this year and is widely considered one of 2021’s best new ETFs.
Never-Ending Fee War
Despite attention-grabbing headlines around bitcoin ETFs, mutual fund conversions, and thematics, the ETF fee war is quietly still raging. iShares, Vanguard, State Street, and DFA have all recently chopped fees. Billions of dollars continue finding their way back into investors’ pockets, a combination of ETF fee compression and investors gravitating towards lower cost products…
Source: FactSet’s Elisabeth Kashner
Wyden’s ETF Tax Proposal
While lower (and declining) fees are an often-cited benefit of ETFs, tax efficiency has played a meaningful role in several of 2021’s biggest ETF trends – namely record inflows and new launches. In September, Senate Finance Committee Chair Ron Wyden put forth a piece of draft legislation, which among other things, included eliminating the in-kind redemption tax-deferral of ETFs. While Senator Wyden’s proposal hasn’t made much headway, the topic will likely now be a talking point in future tax proposals.
Source: CFRA’s Todd Rosenbluth
ETF Chart of the Year
The ProShares Bitcoin Strategy ETF (BITO) became the fastest ETF to reach $1 billion in assets, hitting the mark in only two days. The previous record was held by the SPDR Gold Shares (GLD), which took three days to achieve the milestone in 2004.
Source: Bloomberg’s James Seyffart
See you in 2022!
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