ETF Prime: 5 ETF Stories to Watch as 2026 Gets Underway

Core Insights - The ETF market experienced nearly $1.5 trillion in net inflows in 2025, marking a record year for the industry [1] Small-Cap ETFs - Small-cap ETFs faced net redemptions in 2025, with approximately $7 billion in outflows, significantly underperforming large-cap counterparts [2] - The S&P 600 rose about 6%, lagging the S&P 500 by over 1,000 basis points, although the gap narrowed to 100 basis points in Q4 [2][3] - Major outflows were concentrated in the iShares Russell 2000 ETF (IWM) and iShares Core S&P Small-Cap ETF (IJR) [3] Thematic ETFs and AI - Thematic ETFs, particularly those focused on artificial intelligence, saw around $16 billion in inflows, representing over half of all thematic inflows [4] - The iShares AI Innovation and Tech Active ETF (BAI) attracted nearly $8 billion [4] - Other notable thematic plays included the Range Nuclear Renaissance Index ETF (NUKZ), which increased by 55%, and the ROBO Global Robotics & Automation Index ETF (ROBO), which gained 22% in 2025 [4] High Yield ETFs - High yield ETFs, such as the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and the iShares Broad USD High Yield Corporate Bond ETF (USHY), returned close to 9% in 2025, outperforming the Aggregate Bond Index [5] - Despite tight credit spreads, 38% of advisors still find high yield corporate bonds attractive [5] Industry Developments - Over 30 firms, including Dimensional Fund Advisors, BlackRock, and JPMorgan Chase & Co., are expected to launch ETF share classes of mutual funds by the end of Q1 [6] - Goldman Sachs is integrating Innovator ETFs following a $2 billion acquisition, which is anticipated to create synergies by combining Innovator's products with Goldman's distribution network [7] New ETF Strategies - Cullen Roche launched three new ETFs in November 2025, targeting five-, 10-, and 20-year time horizons using an asset-liability matching framework to address sequence of returns risk [8]