According to VettaFi’s ETF Trends, 543 ETFs were launched in 2023, 63 more than the previous record of 480 in 2021. Of those launches, approximately three-quarters are actively managed ETFs.  

“It was only a few years ago when we crossed 2,000 ETFs listed that the first ‘there are too many ETFs!’ complaints started up, and yet here we are,” said Dave Nadig, VettaFi financial futurist. 

One area that’s been prime real estate for asset managers is conversions from mutual funds to ETFs. In 2023, 39 of them were about the same as the conversions in 2021 and 2022 combined. 

However, ETF closures remain significant. In 2023, 246 ETFs closed, including seven that opened in the same year. 

Through the end of September 2024, 328 active ETFs launched, the second highest number year-to-date behind only 2023. Of those launches, 126 were equity ETFs, 118 were alternative assets, 73 were fixed income, and eight were asset allocation funds. Like in 2023, a majority of the ETF launches this year will be actively managed.   

Here are the three best ETF launches so far in 2024.

Key Points About This Article:

• The latest ETF from First Trust takes reported earnings to task. 
• Income investors will love the six-fold increase in yield from the Nasdaq-100. 
• ChatGPT, Claude, and Gemini do the heavy lifting.  
• Sit back and let dividends do the heavy lifting for a simple, steady path to serious wealth creation over time. Grab a free copy of “2 Legendary High-Yield Dividend Stocks” now.  

First Trust New Constructs Core Earnings Leaders ETF (FTCE)

While the First Trust New Constructs Core Earnings Leaders ETF (NYSEARCA:FTCE) might be a mouthful, its premise is sound.

“Increasing valuations have been a key driver of returns for the current bull market, while earnings growth has been more muted. Consequently, for the bull market to continue, we believe investors may turn their focus more heavily towards stocks that have the potential to deliver high quality, repeatable earnings,” said Ryan Issakainen, CFA, Senior Vice President and ETF Strategist at First Trust.

The ETF, which launched on Oct. 2, is not actively managed. It tracks the performance of the Bloomberg New Constructs Core Earnings Leaders Index, which starts with the Bloomberg US 1000 Index and cuts the number of holdings down to 100 with a 4.5% cap on each stock and sector caps based on the parent index. The index and ETF’s holdings are reconstituted and rebalanced quarterly. 

The median market cap of the 100 holdings is $62.1 billion. The top 10 holdings account for 38% of its portfolio. Since it’s only weeks old, it has just $1 million in net assets. It charges 0.60%, which is reasonable given the work done by New Constructs to differentiate between reported earnings and “core” earnings.   

Pacer Metaurus Nasdaq-100 Dividend Multiplier 600 ETF (QSIX)

The Pacer Metaurus Nasdaq-100 Dividend Multiplier 600 ETF (NASDAQ:QSIX) launched on Sept. 24. Pacer is one of the most innovative ETF providers in the U.S. 

This particular ETF looks to attract income investors who also want some capital appreciation from their investments. It reminds me of the equity-linked GICs offered by Canadian banks, only better. 

“Investors are eager for income while aiming to capture the long-term capital appreciation that an index like the Nasdaq offers,” said Sean O’Hara, President at Pacer ETF Distributors.

While the ETF might seem complicated, it’s not. 

Pacer takes the Nasdaq-100 Index and separates the dividend cash flow from the price appreciation/depreciation that makes up the total return. They then cut the index exposure to 90% and reallocate the remaining 10% to U.S. Treasuries and other cash-generating vehicles to deliver 6x the dividend yield of the Nasdaq-100, which is currently approximately 0.66%. 

Through dividend growth, you’re gaining income and inflation protection while lowering your volatility and risk exposure to tech and non-financial stocks. 

At an annual fee of 0.60%, QSIX is worth the price of admission.  

Intelligent Livermore ETF (LIVR)

If you’re a big believer in AI (artificial intelligence), the Intelligent Livermore ETF (NASDAQ:LIVR) is the fund for you. 

Deepwater Asset Management’s new investment firm, Intelligent Alpha, launched the ETF on Sept. 18. It constructs investment strategies using an investment committee built on GPT, Claude, and Gemini large-language AI models.

“The evolution of AI to current large-language models from the prior popularity of machine learning models has enabled the technology to provide differentiated investment analysis compared to human peers to enable a variety of investment styles,” stated the ETF’s press release.

The three-step process for constructing a portfolio of 60-90 stocks begins with a human analyst setting the parameters of the portfolio, including the target investment universe, maximum weightings, industries to be avoided, etc. The three AI models then create a 20—to 30-stock portfolio. The human analyst then ensures that the AI models meet the requirements of the investment strategy.  

The ETF is attractive because the firm will train the large-language models used for the three AI chatbots on the investment strategies of some of the world’s greatest investors, including Warren Buffett. 

Charging 0.69% and expected to have a high turnover of stocks, it might not be for everyone, but it’s certainly a taste of things to come in asset management. 

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