ETF Market Sees Dynamic Shifts with New Launches and Strategic Adjustments

ETF Market Sees Dynamic Shifts with New Launches and Strategic Adjustments

The exchange-traded fund (ETF) landscape is experiencing significant transformations, marked by innovative fund introductions, strategic realignments, and evolving regulatory frameworks. These developments reflect the industry’s adaptability to investor demands and global economic shifts.

Vanguard’s Ex-China Emerging Markets ETF

Vanguard Group has announced plans to launch the Vanguard Emerging Markets ex-China ETF, targeting emerging markets while excluding Chinese investments. This move addresses growing investor concerns about China’s geopolitical risks and market interventions. The fund is expected to debut later in the summer of 2025, offering substantial exposure to companies in Taiwan and India, which together constitute nearly 60% of the index. The ETF will charge a competitive 0.07% fee, providing an option for investors seeking to minimize exposure to China while maintaining emerging market investments. Vanguard files for new ex-China emerging markets ETF

ARK 21Shares Bitcoin ETF Share Split

21Shares US has announced a 3-for-1 share split of the ARK 21Shares Bitcoin ETF (ARKB.Z), effective at market open on June 16, 2025. This initiative aims to enhance affordability and accessibility for retail investors by reducing the price per share while maintaining the ETF’s net asset value, ticker symbol, and investment strategy. The decision follows the U.S. Securities and Exchange Commission’s January 2024 approval of spot bitcoin ETFs, a milestone that has legitimized digital assets and attracted significant inflows. ARKB has demonstrated strong performance, increasing nearly 12% year-to-date and about 27% in the current quarter, closing at $104.25 on Monday. Simultaneously, Bitcoin has surpassed the $100,000 threshold, reinforcing bullish sentiment in the market. The share split is intended to improve liquidity and broaden retail participation without altering the underlying investment structure. ARK 21Shares Bitcoin ETF to undergo 3-for-1 share split on June 16

Active ETFs Under Scrutiny

A significant number of investment managers are facing criticism for promoting exchange-traded funds (ETFs) as actively managed while closely mirroring benchmark indices, a practice termed “shy active” by Morningstar. A Carne Group survey found that 88% of wealth managers and institutional investors believe these ETFs fail to meet their active management claims. Many of these funds engage in minimal deviations rather than employing traditional stock-picking strategies. Transparency concerns, especially due to European regulations mandating daily portfolio disclosures, have impeded the launch of genuinely active ETFs, as managers fear revealing proprietary trades. However, new semi-transparent structures introduced in Luxembourg and Ireland are expected to encourage truly active fund strategies by protecting trade confidentiality. Experts emphasize the importance of transparency and investor awareness about what such ETFs truly offer. Despite claims of misleading practices, some argue for the utility of low tracking error funds, provided their strategies and performance metrics are clearly disclosed. The active ETF market remains nascent in Europe, but anticipated regulatory changes may lead to more authentic offerings in the near future. Investment managers accused of misleading market over ‘active’ ETFs

Defense-Focused ETFs in Europe

In response to escalating geopolitical tensions and increased defense spending by European governments, major global asset managers such as BlackRock and BNP Paribas have launched new exchange-traded funds (ETFs) focused on Europe’s defense industry. These funds aim to capitalize on the continent’s rearmament efforts, spurred in part by U.S. President Donald Trump’s calls for Europe to become less reliant on American military support. Over the past seven months, at least nine Europe-focused defense ETFs have been introduced, a recent trend in a market that already offers more than 50 defense ETFs globally. So far in 2025, investors have injected $8.4 billion into defense ETFs, with $2.7 billion directed toward the European-focused variants, more than double the total investment for all of 2024. BlackRock’s new ETF was listed in Amsterdam and Frankfurt, while BNP Paribas’ ETF is already listed in Paris and will soon be listed elsewhere in Europe. These funds typically include companies within European NATO member states. The surge in defense stock values has encouraged more money managers to enter this space, including firms like Allianz and UBS, which have relaxed previous restrictions on defense investments. Global investors launch Europe defence funds to profit from rearmament

Challenges Ahead for ETFs

In 2024, U.S. exchange-traded funds (ETFs) experienced record inflows of $1.1 trillion, nearly doubling the $597 billion from the previous year. Analysts attribute this growth to the bull market, innovative products in cryptocurrencies and options, and investors’ preference for low-cost, highly liquid ETFs. However, in 2025, the industry could face challenges such as market saturation and the difficulty of attracting investors to complex products. A record number of ETF closures is expected, surpassing the 186 liquidations in 2024. Despite these challenges, the sector remains optimistic, reaching $14 trillion in global assets by the end of 2024, with a significant increase in new ETF launches, including products based on bitcoin and risk management strategies. ETFs could face obstacles in 2025 after bumper year

Capital Group’s Active ETF Model Portfolios

Capital Group, the largest active asset manager globally, is entering the active ETF model portfolio market with eight model portfolios made entirely of its own active ETFs. This move aligns with a growing trend where financial advisers prefer pre-constructed model portfolios to streamline their investment processes. These portfolios, which match specific risk levels or investment goals, are increasingly popular in the US. Capital Group’s new offerings leverage their 22 ETFs, which have garnered $53bn in assets. By utilizing ETFs, advisers benefit from lower fees and increased tax efficiency compared to mutual funds. The model portfolio market, valued at $2tn in the US, is traditionally dominated by broker-dealers but is seeing a shift towards asset manager and third-party operated portfolios. The launch of Capital’s all-active ETF portfolios is seen as a response to the evolving financial advice ecosystem, where advisers focus more on comprehensive financial planning and outsource investment management. Additionally, many US asset managers plan to introduce actively managed ETFs in the near future, further enhancing the availability of model portfolios. Capital Group wades into active ETF model portfolio market

China’s ETF Market Opening to Western Firms

China is considering granting access to Western firms like Citadel Securities, Jane Street, and possibly Optiver to operate as market makers in its $520 billion exchange-traded fund (ETF) market. This move could enhance trading efficiency and reduce costs due to the experience international firms bring in providing ETF liquidity. Over the past two years, China has expanded its ETF sector significantly, growing 134% to become Asia Pacific’s second-largest behind Japan. Despite the growth, ongoing U.S.-China trade tensions, including recent U.S. tariffs of 145% on Chinese goods, may delay approval for U.S. firms. Market makers offer continuous buying and selling prices for ETF shares, enabling smooth trading, and licensed market makers in China benefit from reduced fees and trading restrictions. Citadel has already applied to establish a brokerage unit in China, though none of the firms or China’s securities regulator has publicly commented. While China has opened more of its financial sector to foreign firms in recent years, geopolitical tensions and economic slowdown have led firms like Fidelity, Morgan Stanley, and Legal & General to scale back their operations in the country. China has considered opening its $520 billion ETF market to Western market makers, sources say

These developments underscore the dynamic nature of the ETF market, as industry players adapt to evolving investor preferences, regulatory landscapes, and global economic conditions.