ETF Market Booms: Record Launches & Sophisticated Strategies

Even with the constant barrage of tariff uncertainty, there’s simply no stopping the engine of ETF creation. More than 288 new ETFs have already launched this year – well beyond the 120 new launches by the same time a year ago. At the current pace of 75+ monthly launches, the year could see 1,000 new ETFs, eclipsing 2024’s record of 750.

So far, active equities have dominated the scene. Roughly 70% of all launches have been equity ETFs, with nearly 200 in active products. Active equity ETFs dominate, making up 70% of new launches (nearly 200 products) and 30% of trading volume. Leveraged ETFs are also surging, with 63 launches this year. This is close to 2024’s full-year total of 71. Issuers are capitalizing on record stock market volatility and demand for low-cost, sophisticated strategies.

Heading into 2025, advisors were seeking out alternatives given the uncertainty in the equity and fixed income markets. Investors are generally cautious and nervous about unhedged exposure to the broader market.

One timely entrant is the Unlimited HFGM Global Macro ETF (HFGM), which launched last week and aims to bring hedge fund strategies to everyday investors. Unlimited co-founder Bob Elliot, who previously ran Ray Dalio’s investment team at Bridgewater, has been vocal about his desire to disrupt the typical “2 and 20” hedge fund fee structures. He is now bringing his top-tier market expertise and offering an array of hedge fund strategies in an ETF wrapper.

HFGM, which charges 95 basis points, uses a proprietary algorithm to invest in ETFs and futures contracts widely held by global macro hedge funds and dynamically adjusts based on market conditions. The aim is to replicate returns across such hedge funds through a worldwide lens, with a slightly amplified risk-return profile. Its sibling fund, the Unlimited HFND Multi-Strategy Return Tracker ETF (HFND B-), is also paving the way for future launches of ETFs, such as long-short equity and managed futures ETFs.

Everyone wants to invest the way Yale or Harvard invests. However, they don’t have that kind of access or infinite timeline. The Cambria Endowment Style ETF (ENDW) just launched two weeks ago to offer diversified, global exposure to a range of assets inspired by endowment-style investing. The ETF accrued $98 million right from the get-go. This was all funded by individual advisors and investors who swapped over to an ETF from an SMA through the 351 Exchange. The exchange allows investors to circumnavigate the challenges and complexities you often see with traditional tax-loss harvesting strategies. It also takes on an aggressive risk profile – targeting notional exposure of 130%-150% of total assets using a dynamic mix of ETFs and futures.

For many, concentration risk remains top of mind. Diversification away from large caps has been the name of this year’s game. Enter the iShares S&P 500 3% Capped ETF (TOPC) – part of the iShares Build ETFs toolkit and a simple, straightforward, plain-vanilla strategy. The ETF caps exposure at 3% per holding in the S&P, then redistributes excess weight to companies that are below the 3% weighting cap – lowering exposure to tech and financials versus cap-weighted indices.

Much like the Invesco S&P 500 Equal Weight ETF (RSP A-), the fund acts as a kind of tasting menu of all the S&P 500 dishes. At 0.09% fees, it’s a cheaper alternative to the RSP (0.20% fees), offering a middle ground between cap-weighted and equal-weighted approaches. To some, equal weight might be too extreme a dilution, leading to excessive exposure to smaller-cap companies. For those who believe concentration has topped out, TOPC offers an attractive in-between product.

Brookmont’s new Catastrophic Bond ETF (ILS) – the first of its kind – aims to provide natural disaster relief by allowing investors to buy insurance-linked securities that often pay double-digit yields.

How does a cat bond work? An insurer or reinsurer will issue you a bond that will pay a high coupon, thereby transferring the risk of an insurance company to the bondholder. If disaster never strikes, you just keep collecting premia for years. The downside is you may lose some principal. However, the hope is that the payout will be easily covered by the premia they’ve accrued over the years. Cat bonds may also be structured in a pooled format (similar to a CLO) to mitigate that risk. In that case, if you lose principal on one disaster, your other holdings are still protected.

Cat bonds are attractive for their floating rates and substantially high yields (typically in the low teens) – in fact, cat bonds have outperformed high yield bonds in recent years. Tied purely to unexpected natural disasters, such bonds have minimal correlation to the market. Keep in mind, cat bonds can be relatively illiquid to trade.

Teucrium, which has been a titan in the commodities space, just dipped its toes into crypto with the launch of its 2x Long Daily XRP ETF (XXRP). The $25 million ETF launched earlier this month. It saw more than $5 million in trading volume on its debut as the first U.S.-based XRP ETF. The launch coincided with a nearly 40% surge in XRP’s overall trading volume, to the tune of about $9 billion. The fund aims to provide amplified exposure to XRP to investors seeking more aggressive ways of getting into crypto.

How can the SEC approve a 2x leveraged or inverse crypto product before approving the spot crypto ETF itself? Leveraged products are typically invest in derivatives – in this case, futures – which may allow regulators to impose strict rules on investor protection, risk disclosure, and trading. Regulators often feel they have a better grasp on the flow of futures contracts versus cash.

Given the new SEC regime, many on the Street believe the environment just got a whole lot crypto-friendlier. Atkins has promised to make digital asset regulation a “top priority.” Right now, there are more than 70 crypto ETF filings waiting in the wings and counting.

With a record-breaking number of launches and diverse strategies, investors have more options than ever to navigate volatile markets. But issuers must differentiate to survive. Despite the boom, 40 ETFs have closed in 2025 due to low assets or liquidity. Still, the ETF machine shows no signs of slowing, blending innovation with accessibility for investors navigating uncertain markets. While the competitive landscape means some ETFs will inevitably falter, the relentless pace of creation underlines an exciting era for investors seeking smart diversification.

For more news, information, and analysis, visit VettaFi | ETFDB.