Although the ETF industry is on the cusp of celebrating the 30-year anniversary of the first U.S. listed ETF being launched, the industry’s 29th year has been filled with plenty of historical milestones. 

Let’s examine some of the most important ETF trends in 2022:

Active Funds Make Noise
The growth of actively managed ETFs has been among the most important developments. And over 55% of all ETF launches this year have been actively managed, according to NYSE data. While that’s slightly down from 2021, 639 active ETFs experienced positive cash flow, which represents nearly 71% of all ETFs. Put another way, investors’ interest in active ETF solutions is growing.  

“ETFs, for many years, were just indexed and now they’re active. In fact, 30% of all ETFs today are actively managed and some of the biggest active managers are now just entering or planning to enter the ETF market,” said Douglas Yones ChFC, Head of Exchange Traded Products at NYSE. “Both large and mid-sized asset managers are offering interesting opportunities for investors’ portfolios.” 

ETFs Stealing Asset Flows
Positive asset flows into ETFs has come at the expense of asset flows diverting away from or out of mutual funds. 

"We've seen nearly $446 billion in outflows from fixed income mutual funds. On the flip side, we've seen about 

$167 billion of inflows into fixed income ETFs***, which is really interesting," said Lance McGray, Head of ETF Product at Advisors Asset Management. 

McGray notes there's around $4.5 trillion invested in fixed income mutual funds compared to just $1.3 trillion invested in fixed income ETFs. Despite the bigger asset size, McGray sees fixed income ETFs benefiting from higher cash inflows.   

Diversity and Maturity
Another testament to the diversity of the ETF market are performance divergences between smaller sized funds (by assets) versus widely held ETFs like the SPDR S&P 500 ETF (SPY). 

“56% of equity ETFs have performed better than the S&P 500 this year compared to only 19% last year, said Athanasios Psarofagis, a Bloomberg ETF analyst. Of course not every ETF goal is to beat the index but still a notable stat, that speaks to the ETF industry’s maturation. 

Product Innovation
The birth of single-stock tracking funds was among the ETF industry’s most creative offerings. For example, Direxion Investments introduced 10 bull and bear ETFs linked to blue chips like, Apple, Alphabet, Microsoft and Tesla. The bull funds use 150% daily leverage on each of these respective stocks, while the bear funds are designed for 100% daily opposite performance.  

“We’re seeing a lot of trading interest in pre or post-earnings reports or headlines on these individual stocks, said Ed Egilinksy, Head of Sales and Distribution & Alternatives at Direxion Investments. 

One possible use of single stock ETFs is for investors who don’t want to use margin but who may want to use the bullish ETFs which use 150% daily leverage. On the flip side, investors who want to hedge single stock risk could use a 100% inverse ETF to protect their downside should the stock’s share price decline.  

Rookies of the Year
The 2022 rookie class included some familiar names in the asset management business. 

The top three new ETFs by assets gathered** were the Dimensional U.S. Marketwide Value ETF (DFUV) with $8.3 billion, the JPMorgan International Research Enhanced Equity ETF (JIRE) with $5.4 billion and the Dimensional U.S. High Profitability ETF (DUHP) with $1.8 billion. 

Among the top ETF firms with assets gathered are Dimensional Fund Advisors and JP Morgan Asset Management. Both firms exceeded $105 billion in combined ETF asset flows and each have the chance to exceed $60 billion in cash flows for all of 2022 at their current pace.  

Looking ahead to 2023, financial advisors and investors can expect more big things from the ETF industry. Major firms that have yet to jump into the ETF market will join the club. Mutual fund to ETF conversions will intensify. And while it may seem like more clutter, the pursuit for investment firms will be to introduce innovative products that solve investors’ real life problems. 

*Data through 12/5/22. **Data through 9/30/22. ***Data through 11/23/22