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ETFs

Over 1,390 ETFs Launched Globally, While Top Issuer Cuts 13 Funds

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A record-breaking 1,397 ETFs were launched in just five months, while Leverage Shares shuts down 13 underperforming funds.

In an impressive surge, the global exchange-traded fund (ETF) market witnessed the launch of 1,397 new ETFs in the first five months of the year, marking a significant milestone.

Leading ETF Issuers

ETFGI, a renowned research firm, reported that Leverage Shares led the pack with an impressive 94 new ETF launches. Following closely behind was iShares, with 48 launches, while Global X claimed the third spot with 41 new offerings. Notably, iShares is part of BlackRock (NYSE:BLK), which has reported a remarkable net inflow of $135 billion for its iShares products in the third quarter of this year.

Adding to this competitive landscape, State Street (NYSE:STT) is also rapidly expanding its ETF offerings. During an earnings call on October 14, CFO John Woods announced that the company launched 38 new financial products and solutions in the quarter, which included 13 ETFs.

Record Closures in the U.S. Market

Despite the surge in new fund launches, the U.S. market has witnessed an alarming trend with 110 ETF closures reported through May. This record-setting high reflects the challenges some funds face in attracting sufficient investor interest.

In particular, Leverage Shares is shutting down 13 of its single-stock leveraged ETFs, which use derivatives to amplify the daily performance of individual stocks by a factor of 2X. The decision to close these funds came after the Themes ETF Trust board cited their inability to attract enough investment assets. Trading for these funds is scheduled to cease at the close of October 19, 2026, with the final liquidation date set for October 22, 2026.

Key Considerations Before Investing in ETFs

As new ETFs flood the market, prospective investors should keep several important questions in mind:

  1. Does this ETF fulfill a unique need in your portfolio? If you already possess a diversified index fund, acquiring another ETF with overlapping stocks might only increase your fees.
  2. Is it sustainable? Assess the ETF's total assets and average daily trading volume. The closures of Leverage Shares’ funds highlight the importance of this factor.
  3. Do you understand its return mechanics? Leveraged ETFs reset daily, which can lead to returns that diverge from simply double the performance of their underlying stocks over longer periods. Additionally, funds engaging in options trading may limit their upside potential.
  4. What are the ramifications of a closure? Closure timelines are dictated by the issuer, not the investor. Furthermore, liquidation distributions are taxable events, leading to potential tax implications if your ETFs are held in a taxable account.

For many investors, the growing number of ETFs can introduce more avenues for error. In fact, many retirement investors find that a select few established, well-capitalized ETFs already adequately serve their portfolio needs. The upcoming release of ETFGI's next launch count will reveal whether the market continues to see a flood of new products that investors may not demand.

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