The ETF explosion

Gone are the days where a handful of exchange-traded funds provided a cheap and reliable lynchpin for your portfolio. Nowadays, ETFs are a dime a dozen—and investors can’t get enough of them.

Thanks to fewer opportunities to stand out in traditional passive and active strategies, asset managers are increasingly designing off-the-wall products to grab investors’ attention. The result: some pretty complicated new options, and a record boom for ETFs.

Number go up

There were 1,023 new ETFs launched in the first eight months of this year, according to research from Wall Street Horizon—a 52% jump year-over-year. But where there’s a boom, there’s also some bust: More than 250 have closed year to date, compared to the roughly 165 closures at this time in 2025.

No funds are immune—we’ve seen closures at some of the industry’s major players, including BlackRock’s iShares and Invesco; the same goes for firms with funds that are more narrow in scope, like Bitwise (crypto) as well as Leverage Shares and GraniteShares (which focus on leveraged ETFs). But instead of taking the rising number of closures as a reason to fret, some analysts say they’re evidence of efficiency: ETFs that don’t work for investors are being pushed out more quickly.

“Not every new product will achieve the investor adoption or scale needed to remain viable,” GraniteShares founder and CEO Will Rhind told Barron’s last month. The firm is “comfortable taking calculated risks and bringing innovative ideas to market,” but “that also means being disciplined enough to close a fund when it has not gained sufficient traction.”

Inflows keep flowing

The other outcome of a super-efficient ETF scene: More cash flowing through these products than ever.

Independent ETF research group ETFGI reports that American exchange-traded funds pulled in $73 billion in August alone, bringing the year’s inflows to $663 billion, and total ETF industry assets to a record $2.72 trillion. Those are eye-watering numbers, especially considered in the big picture: Active ETF assets have increased 42.6% year to date.

So, where is all that cash going? When it comes to industries, that can be summed up in two letters: AI. A State Street analysis finds that tech took in $13 billion of the $17 billion invested into industry-specific ETFs in June.

But while tech-focused ETFs have stolen the spotlight, investors aren’t throwing all their money at AI alone. When it comes to single-fund inflows, reliable, low-cost options still dominate: The classic Vanguard S&P 500 ETF has pulled in more money than any other single ETF product this year, climbing above $1 trillion in assets for the first time ever this summer.

Running the risk

As ETF investments grow by leaps and bounds, it seems inevitable that issuers would start testing just how far the enthusiasm could go—and push the boundaries. The cheap, set-and-forget ETFs of yore are no longer the whole game.

Thanks to those new experiments, whether they be derivative-based, single-stock, or defined-outcome, an ETF now can be as risk-motivated as any other investment. It’s a total reinvention of the ETF’s reputation, and investors are enjoying the wild ride.—GR