The Tell: ETF survival of the fittest shows just what’s going on in financial markets

The Tell

So far in 2020, more ETFs have closed than opened

It’s not exactly “the Hunger Games,” but ETF survival is becoming more contested.


Everett Collection

As the market for exchange-traded funds matures, it’s coalescing around a few winners and leaving laggards behind, allowing ETF trends to more clearly reflect what’s going on in broader financial markets.

That’s the conclusion of a Wednesday research note from DataTrek Research Co-founder Nicholas Colas.

So far in 2020, 77 new ETFs have launched, but 123 have closed, Colas noted: “We’ve been actively covering the ETF industry since the Financial Crisis and cannot recall ever seeing the number of ETFs actually shrink.”

Related:These are the companies that open — and close — the most ETFs

But it’s not the ETF universe that’s shrinking: funds have attracted $108 billion of new money in the year to date. Rather, market churn is designating clear winners and losers. Colas calls it “peak Darwin” for ETFs. Out of nearly 2,300 funds, just over a dozen are emerging as the heavyweights, and they’re mostly concentrated into three broad categories, as shown in the table below.

US equities (47%, among 8 funds:)

Vanguard S&P 500 ETF
VOO,
-0.39%
 iShares Core S&P 500 ETF
IVV,
-0.41%
Vanguard Mid-Cap ETF
VO,
-0.76%
Vanguard Total Stock Market ETF
VTI,
-0.33%
Vanguard Growth ETF
VUG,
+0.39%
Invesco QQQ Trust
QQQ,
+0.82%
Health Care Select Sector SPDR Fund
XLV,
-0.61%
Energy Select Sector SPDR Fund
XLE,
-2.06%
Fixed income (25% of total, in 4 funds:)

SPDR Bloomberg Barclays 1-3 Month T-Bill ETF
BIL,
+0.02%
iShares Barclays Short Treasury Bond Fund
SHV,
-0.00%
iShares Barclays 1-3 Year Treasury Bond Fund
SHY,
+0.02%
iShares iBoxx $ Investment Grade Corporate Bond ETF
LQD,
-1.09%
Commodities (18% in 3 funds)

SPDR Gold Trust
GLD,
-1.27%
iShares Gold Trust
IAU,
-1.05%
United States Oil Fund
USO,
-2.46%

“Investors are largely allocating capital to US large caps, short term Treasuries, investment grade corporates, gold,” Colas noted.

See:Vanguard blew away the competition in Q1, fund flow data show

2020’s winners and losers in terms of returns also tell a story about how industry and the economy is changing.

The biggest winner so far, with a 36% return, is ProShares Long Online/Short Stores ETF
CLIX,
+2.00%

, a popular way to play the coronavirus-induced stay-at-home orders. The biggest loser, reflecting the global oil price war and glut, is the Invesco Dynamic Oil & Gas
PXJ,
-4.50%

fund, down more than 60%.

See:Retail investors are getting ‘hosed’ with the biggest oil ETF down more than 30% this week

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