The world of exchange-traded funds (ETFs) is a dynamic and ever-evolving landscape, with new products constantly entering the market. However, not all ETFs are built to last, as evidenced by the 'graveyard' of Canadian ETFs that have been wound up over the past two decades. This article delves into the survival and success of newer ETFs that have passed the five-year mark, offering valuable insights for investors.
In 2020 and 2021, markets experienced a unique blend of challenges and opportunities. The early days of the pandemic brought investor drawdowns, followed by a remarkable rebound. Unprecedented policy support, near-zero interest rates, and a surge in retail participation created a perfect storm for ETFs. This period saw a flurry of new product launches aimed at meeting investor demand. While not all ideas were destined for success, a select few have proven their mettle over time.
The author, using Morningstar Direct, screened over 2,000 Canadian-domiciled ETFs launched in 2020 and 2021, focusing on those with a Five-Star Morningstar Rating for Funds and a Gold Morningstar Medallist Rating. These ratings indicate the funds' ability to outperform peers in the future. The resulting list of qualifying funds is presented, offering a glimpse into the performance and asset allocations of these ETFs.
The author emphasizes the importance of evaluating ETFs beyond their initial pitch, as they navigate different market regimes and attract investor capital. This analysis provides a unique perspective on the resilience and potential of newer ETFs, offering investors a chance to explore opportunities that have stood the test of time.
However, it's crucial to remember that this article does not constitute financial advice. Investors are encouraged to conduct their own independent research before making any investment decisions based on the information provided.
