Core Insights - Active ETFs have seen significant inflows in the first half of the year, nearly matching total inflows for all of 2024, indicating strong demand in the market [1] - Despite the surge in active ETF launches, 71% of ETF issuers report challenges in gaining shelf space at broker-dealers, highlighting a competitive and difficult distribution landscape [1] - The SEC is expected to approve a dual-share-class structure, prompting many fund shops to expedite their ETF offerings, reflecting a proactive approach to market demand [2] Industry Trends - Over 800 US ETFs were launched in the past year, with 86% being active products, and active products accounting for 37% of sales this year, showcasing a shift towards active management in the ETF space [4] - Nearly 90% of ETF issuers are currently focused on developing transparent active ETFs, indicating a trend towards transparency and active management strategies [4] - The influx of new products, including niche strategies, may lead to an increase in ETF closures as asset managers navigate market trends and their areas of expertise [3]

Group 1 - Low-cost ETFs require revenue generation to cover costs, leading to regular ETF closures due to insufficient assets [1] - A significant percentage of ETFs are at risk of closure, but investors typically do not lose their investments upon closure [1][2] - For each high-closure-risk ETF, there are usually larger, more viable alternatives available [2] Group 2 - Upon the decision to delist or liquidate an ETF, a prospectus supplement will announce the last trading date and liquidation date [3] - The fund will halt creations and prepare to convert to cash, causing performance divergence from the underlying index [3][4] - Indicative net asset value (iNAV) will continue to be published, and it is advisable to sell shares before the last trading day [4] Group 3 - Liquidation typically results in cash distributions equal to NAV, making it less cumbersome than delisting [5] - If an ETF delists without liquidating, investors must trade over the counter, which is generally more complicated and costly [6] Group 4 - ETF closures can lead to reputation risk for advisors, as recommending a fund that closes can result in difficult conversations with clients [7] - Reinvestment risk arises when an ETF delists or liquidates, requiring investors to find new investment opportunities for their cash-equivalent NAV [7]