The ETF industry witnessed an unprecedented surge, with a historic 1485 funds launched last year. ETFs across various categories pulled in a record $1.12 trillion in capital, almost double the $600 billion of inflows seen in 2022 and 2023 each and topped the previous record of $900 billion set in 2021 (read: 5 Most-Loved ETFs of 2024).
This rapid growth was due to unique strategies, creativity, transparency, diversification benefits, enhanced tax competencies, low turnover, and, of course, low costs. Additionally, both existing and new issuers remained active in bringing innovative products to the market, covering a broad range of asset classes and initiating new investment strategies or themes.
About 78% of new launches were actively managed. The most popular among them were ETFs offering covered call strategies for high-income generation. Additionally, buffer or defined outcome ETFs and single-stock ETFs also experienced significant growth.
We have highlighted some hot trends that drove the record number of launches in 2024:
Bitcoin ETFs
Bitcoin ETFs captured eight of the top 10 spots for new fund launches in 2024, with BlackRock iShares Bitcoin Trust IBIT leading the way and accumulated $37.2 billion in capital. This record-breaking launch surpassed all previous ETF debuts in history. IBIT was launched on Jan 5, 2024. Fidelity Wise Origin Bitcoin Fund FBTC, which debuted on Jan. 11, 2024, secured the second position with $11.9 billion in inflows.
The launch of multiple Bitcoin ETFs ushered billions in new liquidity and normalized Bitcoin as a legitimate investment vehicle. It has led to unprecedented demand for Bitcoin ETFs from institutional investors, retail traders and governments. The solid trend is likely to continue this year, given optimism for a cryptocurrency-friendly regulatory environment under the Trump administration (read: Bitcoin ETFs See $10B Inflows Following Trump Win).
Options-based ETFs
About 25% of new launches are option-related ETFs. Option-based ETFs utilize options strategies to enhance returns, generate income, or hedge against downside risks. These funds often employ approaches such as covered calls, put writes, or collars to achieve their objectives.
Incepted on Jan. 29, 2024, YieldMax Magnificent 7 Fund of Option Income ETFs YMAG has accumulated $350.5 million in AUM so far. It is a fund of funds that invests primarily in seven YieldMax ETFs, each focusing on a major technology company. The fund aims to generate current income through option income strategies. Roundhill S&P 500 0DTE Covered Call Strategy ETF XDTE has gathered $3156.3 million in its asset base since its debut on Mar 7, 2024. It is the first ETF to utilize zero days to expiry (“0DTE”) options on the S&P 500. XDTE seeks to provide overnight exposure to the S&P 500 and generate income each morning by selling out-of-the-money 0DTE calls on the Index.
Buffer ETFs
Buffer ETFs, also known as defined-outcome ETFs, have gained traction for their unique ability to cap potential losses while allowing limited upside participation. These funds use options overlays to create predefined ranges of returns over a set period, typically one year. Among the popular funds were iShares Large Cap Max Buffer Jun ETF MAXJ, which has amassed $138.4 million in its asset base since its debut on June 28, 2024. It seeks to track the share price return of iShares Core S&P 500 ETF (IVV) up to an approximate upside limit while seeking to maximize the downside protection against price declines of IVV over an approximate 1-year period beginning at the end of each June.
Calamos launched two noteworthy ETFs offering exposure to major stock indexes with 100% downside protection. The Calamos S&P 500 Structured Alt Protection ETF CPSM tracks the S&P 500’s SPY capped return, while the Nasdaq-100 Structured Alt Protection ETF CPNJ does the same for the Nasdaq100 QQQ. CPSM, incepted on May 1, has AUM of $69.7 million, while CPNJ has attracted $36.9 million in its asset base since its debut on June 3.
Single Stock ETFs
Unlike traditional ETFs, which typically track a broad index or sector, single-stock ETFs provide exposure to the performance of one specific company by using derivatives. This allows investors to gain exposure to a particular stock without having to buy the stock directly. Single-stock ETFs tap the gambling mindset that exists in markets. While many single-stock ETFs have been launched last year, funds targeting MicroStrategy MSTR were investors’ darling.
YieldMax MSTR Option Income Strategy ETF MSTY seeks to generate monthly income by selling/writing call options on MSTR. It debuted on Feb. 22 and has AUM of $1.8 billion. T-Rex 2X Long MSTR Daily Target ETF MSTU has accumulated $936.8 million since its debut on Sept. 18, while Defiance Daily Target 2x Long MSTR ETF MSTX has gathered $593.1 million. Both funds seek to track two times the daily percentage change in the share price of MicroStrategy (read: 10 Most Heavily Traded ETFs of the Past 3 Months).
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