Active ETFs Start Strong

After a momentous year in 2020, the active ETF market accelerated its growth momentum in the first quarter of 2021. By February, cash flows had already surpassed $30 billion. In other words, it took only a handful of weeks in 2021 for the market to eclipse the full-year cash flow totals for every year prior to 2020. The quarter rounded out at $203.5 billion in total active AUM, putting the industry on pace for another banner year. If you are considering joining the active ETF industry, please contact my team to see how we can support your business goals.

Our NYSE Active ETF Newsletter (subscribe here) breaks down the data around growth and distribution of assets across the industry. The active ETF industry cash flow remains diversified across asset classes and issuers. In total, active ETFs brought in $37.6 billion, surpassing the prior Q1 record of $5.9 billion by more than sixfold. All asset classes have experienced an increase in year-over-year growth and nearly 60% of issuers broke their Q1 cash flow records.

Quarterly Active ETF Cash Flow 2018-2021

In another milestone, semi-transparent ETFs collectively closed with over $1 billion in AUM in early January. It took just 286 calendar days since launch for the semi-transparent marketplace to reach this milestone. For perspective, it took 2,371 days for active transparent domestic equity ETFs to reach the same threshold in 2013.

Subscribe and catch up on the NYSE Active ETF Update, our twice-monthly newsletter covering the latest in active ETF developments.

NYSE Arca LMM Program Enhancements

On April 1, the NYSE implemented several new enhancements to the NYSE Arca Lead Market Maker (LMM) program to reflect ETF issuer priorities and market quality enhancements. These new requirements are designed to align LMM performance benchmarks in three key areas in support of ETF growth:

For the first time ever, ETF issuers on NYSE Arca will have the benefit of assigning additional market maker firms to their low volume ETFs, supplementing the current liquidity being provided by your Lead Market Maker partner. Contact us to find out more about the program, and for support in assigning additional liquidity providers to your ETFs.

NYSE ETP Notification

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First Mutual Fund to ETF Conversions

History was made on March 29 when ADIV and DIVS began trading on NYSE Arca. These two funds, managed by Guinness Atkinson under the SmartETF brand, represent the first-ever mutual funds to directly convert to and trade as ETFs in the U.S. The conversions represent another significant growth opportunity for the ETF market because they are a more seamless, tax-efficient way to place existing strategies in an ETF wrapper. Importantly, active fund managers looking to tap into the flourishing active ETF market now have a direct point of entry. We expect to see a substantial amount of assets follow suit and execute conversions in 2021 and beyond. You can learn more about the process and growth opportunities for conversions at the upcoming NYSE ETF Summit: RSVP here.

SEC Approves Custom Baskets for NYSE Active Proxy Structure ETFs

In February, the SEC approved the NYSE and Natixis Investment Manager’s amended exemptive relief filing to allow for additional basket flexibility – also known as “custom baskets” – for ETFs using the NYSE Active Proxy Structure. The SEC’s approval accommodates construction by asset managers using the NYSE Active Proxy Structure of creation/redemption baskets that differ from the daily tracking basket and proxy portfolio. While traditional transparent ETFs are granted this flexibility through the ETF Rule – this approval marks the first time custom baskets would be available to active, semi-transparent products.