ETF Product Innovation That Matters

Markets move fast, and in the ETF corner of the world, sometimes it feels like it’s practically impossible to keep up. Product development and proliferation have been so intense in recent months. New tickers are coming at us faster than ever. 

September brought us a record number of new ETF launches in a single month: 115. October is already reaching 100 new funds with just one more day to go in the month. At this pace, we could easily end the year with 1,000 new ETFs fresh off the presses, and we are talking about the U.S. market alone. Globally, ETFs are seeing equally impressive growth.  

As we brace for the approval of ETF share classes of existing mutual funds, which is likely to unleash a whole new wave — albeit not immediately — of new ETFs, we get asked a lot: “How much is too much?” 

There’s no question that anyone who sets out to do product due diligence is faced with an increasingly daunting task. Advisors know this well. Product choice is a gift, but it can also be a challenge. 

That said, it’s been exciting to see that some 32 years into this U.S. ETF journey since the arrival of the SPDR S&P 500 Trust (SPY), we are still seeing product development find new paths to innovate, and the tools for market access get sharper and sharper. 

Consider three launches we’ve seen this year that are offering something new:  

PCR is an active strategy that also uses a VettaFi index as benchmark (for full disclosure). It essentially does two things at once: It accesses private credit through swaps that have returns tied to business development companies (BDCs) and closed-end funds (CEFs) found in the index. These BDCs and CEFs invest primarily in private credit (at least 50% of their portfolios). 

PCR also implements, as needed, a credit hedge strategy using derivatives that aims to mitigate interest rate and credit risk. My colleague Roxanna Islam wrote an extensive piece explaining the strategy when it launched. You can check it out here.   

It’s difficult to access private assets in publicly traded wrappers. And the ETF structure has limitations and regulatory constraints on how that can be achieved. But in 2025, we’ve been watching front-row issuers take this challenge head-on. They’ve been developing unique strategies that are getting ETF investors closer to direct access to private assets. 

PCR is one of these funds with a unique take. We’ve seen others from firms like State Street and Global X, to name a few. 

This is a new frontier for ETF investors, and one that’s only getting started in sharpening its tools.   

ARK Invest, as a brand, has been synonymous with disruptive growth of the highest-octane kind. Its flagship fund, ARK Innovation ETF (ARKK), has captured investors’ imagination, exhilaration and, at some points, frustration. That’s the nature of disruptive growth. It goes up and it goes down. 

ARKT is an interesting — if not unexpected — strategy for investors who are looking to, perhaps, bubble-wrap high octane. 

The portfolio provides exposure to ARKK with a buffer through the use of an options overlay. In this strategy, the investor participates in 50% of any decline in the reference asset, ARKK. So, if ARKK drops 20%, ARKT investors are only down 10%. On the upside, investors give up the first 5% in gains, which the firm calls the “hurdle rate,” and participate in about 64% of any upside beyond that. All of that resets annually, running from October 1 to September 30.  

This is one example of the quickly proliferating options-based ETF category offering both downside protection and various levels of buffered experience and/or options-related income. Investors have embraced these types of strategies, which today include many expert providers like Innovator ETFs, Calamos, Allianz, iShares, Aptus, and more. And now, ARK Invest, too.  

DIME is an actively managed ETF that invests in several altcoin ETPs listed globally, looking to deliver on its ticker mission: Digital investing made easy (DIME). 

The portfolio offers comprehensive exposure to the altcoin market, which the firm says “represents some of blockchain’s most innovative developments.” My colleague Nick Wodeshick covered details of the strategy here.  

Cardano (ADA), Solana (SOL), Polkadot (DOT), Cosmos (ATOM), Sei (SEI), Avalanche (AVAX), Sui (SUI) and Aptos (APT) are among the altcoins in the equally weighted portfolio. These altcoins are native tokens in blockchain networks and operations — part of the long-term growth story of the crypto category. DIME does not invest in bitcoin, ethereum, or stablecoins. It’s exclusively an altcoin strategy. 

The fund’s unique approach is one of an emerging lineup of ETFs from crypto-native firms like Grayscale, Bitwise, and Hashdex that are offering different strategies in this category. We’ve seen a lot of interesting products come to market this year, making digital assets increasingly accessible to investors.  

Meaningful Innovation 

The ETF industry has long been known for its low barrier to entry, and high barrier to success. We talk of our large numbers of products and assets, but we also know the graveyard is full of ETF headstones. This is a tough industry. 

But as we look at new launches in 2025, more than 32 years since the first U.S.-listed ETF came to market, it’s exciting to see that some product innovation is still delivering on its No. 1 mission, which is solving investor challenges. These are the types of strategies that are likely to succeed and grow. 

This year’s lineup of — so far — more than 800 new funds is full of unique and interesting, innovative gems that are forging new paths to access and expanding investor reach to markets everywhere. If ETFs are building blocks, these latest tools of the trade are making the job of reaching financial goals easier. 

To start your ETF product due diligence, check out etfdb.com.    

For more news, information, and analysis, visit VettaFi | ETF Trends.

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