The U.S. exchange-traded fund (ETF) industry had quite a year in 2021 – due in part to the 445 new ETFs that launched, 44% more than did in 2020.
U.S. ETFs ended the year with record assets of $7.21 trillion, 31.9% higher 2020. Net inflows of $919.8 billion also hit a record in 2021, more than doubling the previous record of $490.8 billion from the prior year.
“Given back-to-back record-breaking calendar years of net inflows, it is less of a surprise that the supply of ETFs has expanded,” says Todd Rosenbluth, former head of ETF & Mutual Fund Research at CFRA and current head of research at ETF Trends and ETF Database. “We believe investors are benefiting from the transparency provided by ETFs to understand the exposure’s risk and reward potential and combining this with a focus on fund costs.”
And actively managed ETFs are one area of the industry that has started strong in 2022. Through the first two months of the year, actively managed ETFs had net inflows of $22.9 billion, the second-highest start on record. Only 2021 got off to a stronger start through the first two months.
But whether it be active or passive funds, the demand for the best ETFs among retail and institutional investors remains strong. And new ETFs offer investors to explore strategies that haven’t been thought of before or cheaper alternatives to gain exposure to tried-and-true approaches.
With that in mind, here are nine of the most interesting new ETFs that have hit the market in 2022. This list features an array of options for investors to choose from, including familiar fund strategies like those that focus on fundamentals or fighting inflation, while others explore more nascent themes.
Data is as of April 20.
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Dimensional US High Profitability ETFGetty Images
Category: U.S. fund large valuehttps://www.kiplinger.com/investing/stocks/stocks-to-buy/603996/the-12-best-industrial-stocks-to-buy-for-2022Assets under management: $226.3 millionExpenses: 0.22%, or $22 annually for every $10,000 investedDimensional Fund Advisors launched the Dimensional US High Profitability ETF (DUHP, $26.46) on Feb. 24, along with two other actively managed ETFs. These new ETFs are part of the company’s previously stated plans to list 10 additional equity exchange-traded funds in 2022 and convert an existing mutual fund to an ETF structure.
Since launching its first ETF in November 2020, Dimensional Fund Advisors has added 13 active transparent ETFs that have more than $45 billion total net assets.
DUHP is designed to invest in large-cap stocks that the portfolio managers believe have higher profitability than their peers. High profitability is evaluated based on earnings relative to book value and assets. The average holding currently has price-to-book and price-to-earnings ratios of 6.9x and 17.8x, respectively.
The ETF holds 125 stocks in its portfolio at present, with a notable tilt toward large caps, which make up 79% of the fund. Mid-cap stocks account for the rest. The ETF’s top three sectors by weight are technology (30.2%), consumer discretionary (17.9%) and industrials (14.7%).
Not surprisingly, you’ll find popular mega-cap stocks among the Dimensional US High Profitability ETF’s largest positions, including Apple (AAPL), Amazon.com (AMZN) and Microsoft (MSFT). And the fund’s assets are fairly concentrated across its top 10 holdings, which account for 30% of the portfolio.
Dimensional Fund Advisors LP is the investment advisor for DUHP. The fund has four portfolio managers.
Learn more about DUHP at the Dimensional Fund Advisors provider site.
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Global X Dow 30 Covered Call ETFGetty Images
Category: U.S. fund large blendAssets under management: $9.9 millionExpenses: 0.60%Another one of the new ETFs hitting the market this year is the Global X Dow 30 Covered Call ETF (DJIA, $25.51), which launched on Feb. 24. The ETF gives investors exposure to the 30 stocks in the Dow Jones Industrial Average while writing “covered calls” – options that are sold to collect a premium – on the index to generate income.
“DJIA collects premiums from selling the call option in exchange for forfeiting the upside potential of the Dow Jones Industrial Average Index,” states Global X’s press release launching the ETF.
Investors looking for income and concerned that tech stocks could keep falling ought to like DJIA because the index has a tech weighting of just 17.9% compared to 26.0% for the S&P 500 and 48.5% for the Nasdaq-100.
DJIA is Global X’s sixth covered-call ETF. Covered-call strategies can be quite useful in times of rising interest rates as we’re currently experiencing. That’s because they don’t possess the duration risk that exists with corporate bonds and long-term Treasuries. However, they still provide sector diversification from the S&P 500 and Nasdaq 100.
The most interesting aspect of the index is that it is price-weighted rather than cap-weighted. This means that the companies with the higher stock price get a larger weighting in the index.
As such, the Global X Dow 30 Covered Call ETF’s top holding is insurance giant UnitedHealth Group (UNH) with a 10.4% weighting. UNH’s market cap as of April 19 was $508 billion and its share price was $537.70. Apple, meanwhile, has a $2.7 trillion market cap and closed at $167.40 on April 19, but it accounts for just 3.2% of DJIA’s portfolio.
Learn more about DJIA at the Global X provider site.
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Harbor Corporate Culture Leaders ETFGetty Images
Category: U.S. fund large blendAssets under management: $6.9 millionExpenses: 0.50%Harbor Capital Advisors launched the Harbor Corporate Culture Leaders ETF (HAPY, $19.690) on Feb. 24, marking the sixth exchange-traded fund created by the Chicago-based financial advisor. The investment firm had $65 billion in total assets under management at the end of 2021.
HAPY aims to measure the effect corporate culture has on a company’s stock price and it does so by tracking the performance of the Human Capital Factor Unconstrained Index. The index includes U.S. large-cap companies that have high employee engagement and motivation based on human capital scores produced by Irrational Capital – an investment research firm co-founded by leading behavioral science researcher Dan Ariely.
“We believe we have discovered a way to quantitatively capture the powerful connection between human capital and financial outcomes in an investable way,” Ariely said in Harbor’s press release announcing the new ETF. “By uncovering the capital in human capital, we help create investment options that seek to prove that doing the right thing pays.”
The index gives a Human Capital Factor Score to each of the stocks in the Russell 1000. The 70-100 stocks that rank highest for very motivated and engaged employees and that have a market cap of $1 billion at the time of the index’s reconstitution are included in the index. The stocks are equally weighted and rebalanced quarterly.
Current top holdings include athletic apparel maker Lululemon Athletica (LULU), cell tower real estate investment trust (REIT) SBA Communications (SBAC) and utility stock Atmos Energy (ATO). HAPY’s 10 largest positions account for 14% of the fund’s total net assets.
The ETF is fairly concentrated in terms of sector exposure, with 40.5% of assets in tech stocks. Next up are consumer cyclical at 10.3% and healthcare stocks at 9.4%.
Learn more about HAPY at the Harbor Capital provider site.
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SPDR Blackstone High Income ETFGetty Images
Category: U.S. fund high-yield bondAssets under management: $127.2 millionExpenses: 0.70%Another of the new ETFs to launch in February was the SPDR Blackstone High Income ETF (HYBL, $29.60) – a fund that expands the fixed-income offerings from State Street Global Advisors. The ETF, sub-advised by Blackstone’s credit business, invests in U.S. dollar-denominated high-yield debt securities. Its goal is to provide investors with above-average risk-adjusted returns and current income.
“As investors search for higher yields, demand for senior loans and high yield corporate bonds is on the rise,” stated the press release for the ETF’s launch. “HYBL is designed to meet this demand while providing access to Blackstone’s deep expertise across these segments of the credit market.”
The aim of the SPDR Blackstone High Income ETF is to outperform a composite benchmark that’s a 50-50 blend of high-yield bonds and high-yield senior loans with lower volatility than the broader bond and loan markets.
The portfolio managers take a top-down asset allocation approach that looks at things like macroeconomic events and technical factors. They also utilize bottom-up security selection through fundamental credit research. The positions are then weighted based on the extent to which the credit issues are mispriced.
HYBL currently has 344 holdings. The securities in the bond ETF have an average maturity of 5.97 years, which is slightly higher than the category average of 5.52 years. And credit quality here is better than its peers, just 13.7% of its holdings are rated below-B, compared to a category average of 20.5%.
What’s more, the bond ETF boasts an SEC yield – the interest earned after deducting fund expenses for the most recent 30-day period – of 4.4%.
Learn more about HYBL at the State Street provider site.
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SPDR S&P SmallCap 600 ESG ETFGetty Images
Category: U.S. fund small blendAssets under management: $2.9 millionExpenses: 0.12%State Street Global Advisors launched the SPDR S&P SmallCap 600 ESG ETF (ESIX, $28.61) on Jan. 11. It was one of three new ETFs launched by the exchange-traded fund provider to strengthen its environmental, social, and governance (ESG) offerings.
“As ESG awareness and education improves, investors are increasingly seeking to integrate best-in-class solutions across their entire portfolio,” said Brie Williams, head of Practice Management at State Street Global Advisors. The launch of the new ETFs “can bring the potential benefits of ESG investing to the building blocks of a well-diversified equity portfolio,” she added.
ESIX, specifically, seeks to track the performance of the S&P SmallCap 600 ESG Index – a subset of the S&P SmallCap 600 Index with certain sustainability criteria applied.
Stocks excluded include tobacco companies, makers of controversial weapons, businesses in the bottom 5% of the United Nations Global Compact, companies with an S&P Dow Jones Indices ESG score in the bottom 25% of each industry group, and those that generate more than 5% of their revenue from thermal coal extraction or electricity generation.
This has resulted in the SPDR S&P SmallCap 600 ESG ETF’s current lineup of 370 holdings. The group has a weighted average market cap of $2.7 billion, a price-to-earnings ratio of 12.6x, and an average three-to-five year earnings per share (EPS) growth estimate of 14.6%.
The small-cap stocks included in ESIX’s lineup are fairly diversified by sector, with financials (17.2%), industrials (16.9%) and technology (14.3%) the three largest by weighting. The ETF’s biggest positions include energy stock Southwestern Energy (SWN) and apartment REIT Independence Realty Trust (IRT).
And a major move in any one of the ETF’s components is unlikely to make a big impact on the share price considering the top 10 holdings account for just 9% of the fund’s total net assets.
Learn more about ESIX at the State Street provider site.
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IQ U.S. Mid Cap R&D Leaders ETFGetty Images
Category: U.S. fund mid-cap blendAssets under management: $4.9 millionExpenses: 0.16%New York Life Investments’ IndexIQ division launched a suite of new ETFs in February focusing on companies that continually invest in research and development (R&D), putting innovation at the forefront of their growth.
Among them was the IQ U.S. Mid Cap R&D Leaders ETF (MRND, $24.33), which tracks the performance of the IQ U.S. Mid Cap R&D Leaders Index. The index’s selection methodology starts with the Russell Midcap Index and narrows the list to the 100 mid-cap stocks that invest the most into R&D. The index is reconstituted and rebalanced quarterly. No holding can have more than a 5% weight after rebalancing.
“Historically, companies that prioritize investing into research and development have shown favorable tendencies towards outperformance,” said Salvatore Bruno, chief investment officer at IndexIQ, in the press release announcing the launch of the new ETFs. “A greater focus on R&D may lead to greater opportunities for innovation and for key expansions of existing capabilities.”
The 100 holdings in MRND have a total market cap of $2.1 trillion, with the largest holding at $61.3 billion and the smallest at $1.00 billion. The IQ U.S. Mid Cap R&D Leaders ETF’s biggest positions include biotechs Novavax (NVAX) and Incyte (INCY), as well as tech stocks Western Digital (WDC) and HP (HPQ).
Learn more about MRND at the New York Life provider site.
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Engine No. 1 Transform Climate ETFGetty Images
Category: U.S. fund large blendAssets under management: $91.3 millionExpenses: 0.75%Unlike many climate-change exchange-traded funds, Engine No. 1 Transform Climate ETF (NETZ, $53.12) is an actively managed one that doesn’t exclude companies from its fund because they pollute or hurt the planet in some other manner.
Instead, the portfolio managers work with their constituent holdings to nudge these businesses along the energy transition path.
Engine No. 1, the fund’s adviser, doesn’t use ESG ratings to help it select or exclude the companies that end up in the ETF. Instead, it targets companies that it believes are moving toward more sustainable business practices, products and services or creating ways for other companies to incorporate additional climate-friendly initiatives.
It is open to selecting companies considered to be harming the planet that are willing to change and evolve. As such, NETZ is most focused on sectors that will benefit from that transition: Industrials (32.2% of the portfolio), materials (23.9%) and consumer discretionary (18.0%).
The ETF currently has 29 holdings, and its 10 largest positions account for 52% of its total net assets. Among those near the top are farm equipment maker Deere (DE), car stock General Motors (GM) and chemicals manufacturer Albemarle (ALB).
“While most climate-focused funds avoid so-called ‘brown’ legacy companies, we believe there is no way to decarbonize the planet without these companies transforming, and there is no time to lose,” said Chris James, Founder of Engine No. 1, after the early February launch of NETZ.
Learn more about NETZ at the Engine No. 1 provider site.
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Amplify Inflation Fighter ETFGetty Images
Category: U.S. fund large blendAssets under management: $22.6 millionExpenses: 0.85%Amplify ETF launched the Amplify Inflation Fighter ETF (IWIN, $27.53) in early February. This actively managed ETF, which is sub-advised by Toroso Investments, seeks to invest in asset classes that benefit directly or indirectly from inflation.
IWIN fund managers can invest up to 50% of total net assets in commodity futures or exchange-traded funds, which tend to benefit from higher inflation. The rest of the portfolio must be in stocks and other securities.
“Investors are experiencing the negative impact inflation can have on their wallets and portfolios,” said Christian Magoon, CEO of Amplify ETFs, when the new fund launched in early February. “We believe IWIN provides investors with a dynamic, convenient and diverse approach to combat inflation’s impact on broad-based portfolios.”
The top three asset classes as of March 14 were commodities & futures (29.6%), miners (20.6%) and land development (17.6%). As for the commodities allocations, the top three were broad-based (30.4%), Bitcoin-based (20.9%) and gold (17.2%).
And for the stocks held in the Amplify Inflation Fighter ETF, 62.1% are small caps, 21.3% are mid caps, while the rest are large caps. Agriculture REITs Farmland Partners (FPI) and Gladstone Land (LAND) are two of its biggest stock holdings.
As far as timing launches OF new ETFs, Amplify nailed it with IWIN. Given Russia’s invasion of Ukraine only accelerated already red-hot commodities prices in March, IWIN has had a solid start. The ETF gained 8.9% from its Feb. 2 inception through the March 31 close.
Learn more about IWIN at the Amplify provider site.
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Clockwise Capital Innovation ETFGetty Images
Category: U.S. fund technologyAssets under management: $5.0 millionExpenses: 0.95%As the name suggests, the Clockwise Capital Innovation ETF (TIME, $24.070) seeks to invest in innovative companies using 5G internet and cloud-based products and services to grow their businesses. This includes firms focused on artificial intelligence, machine learning and robotic and smart manufacturing.
The new ETF launched on Jan. 28, using the ticker “CWC.” However, effective April 1, the Clockwise Capital Innovation ETF changed its ticker to “TIME.”
TIME’s adviser looks to invest in 10-20 high-conviction businesses, weighting each security between 5% and 20% of the total portfolio. When the ETF takes a stake in a new stock, it will typically start with lower weighting and build over time.
Fund managers Ryan Guttridge and James Cakmak use a “top-down” approach to look for stocks that fit the theme of the fund and combine that with a “bottom-up” strategy to filter the list based on fundamental metrics such as a company’s growth prospects or margin opportunity. They focus on companies with a minimum market cap of $1 billion that are capable of posting 100% returns over the next five years.
Not surprisingly, technology is the most heavily-weighted sector at 40.1% of the portfolio, followed by consumer cyclical (38.5%) and communication services (14.8%). Top holdings include Amazon.com with a 10.2% weighting, as well as Best Buy (BBY) at 9.3%, and Airbnb (ABNB) at 7.3%.
In addition to its focused portfolio, this new ETF also intends to employ a covered-call strategy in down markets to boost its risk-adjusted returns over the long haul.
Learn more about TIME at the Clockwise Capital provider site.