How ETF Issuers Are Attracting ‘Kid-in-a-Candy-Store Money’

With the number of ETF strategies exploding, figuring out which ones are actually worthwhile is growing more complicated than ever.

Exchange-traded funds brought in $540 billion in assets in the first half of the year alone, and the sheer number of ETF launches is overcrowding the markets, according to ETF.com president Dave Nadig. This time next year, the number of ETFs in the US could reach 9,000, given the current pace of launches. “That makes everybody’s job really miserable,” he said during a panel at the Future Proof conference in Huntington Beach, California. “You have to wade through that to find out what’s actually worth having.” 

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There are a few major trends impacting ETF investors heading into 2026, according to Nadig, who previously worked on some of the earliest ETFs as a managing director at Barclays Global Investors. Cheap funds are experiencing massive inflows while products with higher fees are driving revenue for a handful of lucky first-movers.

“I think we may have reached the bottom on the fee wars,” Nadig said.

Despite all the active ETF hype, most of this year’s inflows have gone to “non-traditional” funds, such as synthetic income funds, which track an index using derivative contracts instead of actually buying the securities. Other options-based income products have generated $366 million in new fee revenue this year, according to Nadig, with leveraged and inverse ETFs, as well as buffers, being the other two major successful categories. Interestingly, it’s not Vanguard, State Street and BlackRock making all the money right now, Nadig said. Issuers such as  First Trust and Innovator are raking in hundreds of millions on the backs of their buffered and derivatives-based products.

“A lot of this [gets] called active management and certainly charges active management-like fees,” he said. “But it’s not the kind of active management you’re going to get from Tom Lee down at Fundstrat, where he’s picking stocks.” Since leveraged, inverse and buffered products are newer, issuers are focusing on them to gain a foothold in the market.

Cheap Date. Although the vast majority of investments are in extraordinarily cheap products, more sophisticated funds can still be worthwhile strategies for issuers, Nadig said. That’s because a smaller group of very expensive funds accounts for an outsized share of revenue: For example, JPMorgan and Toroso Investments — the maker of YieldMax ETFs — dominate the synthetic income bracket.

“It doesn’t mean that there’s no money to be made elsewhere,” Nadig said. “But the expensive stuff is just kid-in-a-candy-store money.”