Sustainable strategies don’t guarantee sustainable flows.

Investors pulled $21 billion last year from US mutual funds and ETFs with sustainable investment strategies, a record pace that just surpassed the previous high of $20 billion in 2024, according to a recent Morningstar report. By comparison, the broader world of US mutual funds and ETFs brought in $760 billion in 2025. The slow drain from sustainable funds follows a widespread pullback from the category that started several years ago, marked by strong fossil fuel market performance at the beginning of Russia’s invasion of Ukraine and a long-running campaign by the political right against environmental, social and governance criteria.

“While there are non-financial considerations that folks have on all sides about sustainable funds, generally investors position their portfolios based on what they expect from the market,” said Morningstar Associate Director Alyssa Stankiewicz, an author of the paper.

Energy Drain

As demand for sustainable funds has waned, asset managers have pulled backfrom them. In some cases, that has meant changing product names and/or removing sustainable investing considerations. In others, it has meant closing and liquidating funds or merging them with products that don’t have sustainable mandates. One of the most recent examples is Franklin Templeton’s Putnam funds shedding seven sustainable or ESG ETFs:

• The Putnam ESG Core Bond, High Yield and Ultra Short ETFs are closing and liquidating, per a filing Monday with the Securities and Exchange Commission.
• The Putnam PanAgora ESG International Equity and ESG Emerging Markets Equity ETFs will have the same fate.
• The company is also nixing its Putnam Sustainable Future and Sustainable Leaders ETFs.

Sustain a Bull Market? It’s not all bad news for sustainable investing advocates (this is The Daily Upside, remember?). Despite three years in a row of net outflows for US sustainable funds as a whole, some products, particularly passively managed ones, have attracted assets recently. For example, the First Trust Nasdaq Clean Edge Smart Grid Infrastructure Index Fund (GRID), raked in $2.5 billion last year, with its assets doubling to $5 billion, per the report. That fund has returned 44% over a year and over 4% so far this year. And more demand for power, including for AI and associated data centers, may bode well for clean-energy investments.
Further, climate-related risks have become central to asset management, and sustainability considerations, by any name, are probably present in a wider range of funds than is apparent at first glance. “The use of ESG factors has become commonplace within conventional investing,” Morningstar’s editorial director of sustainability, Leslie Norton, recently wrote. “A focus on financial relevance is strengthening funds that are explicitly sustainable, and trillions of dollars of assets remain sustainably invested.”

Want to ride bitcoin’s wild price swings? Forward, backward or twice as high?

Two firms filed last week for lines of bitcoin volatility ETFs. CoinShares and Volatility Shares are prepping funds with 1x, 2x and 1x-inverse exposure to the CME CF Bitcoin Volatility Index via futures contracts. They could serve as portfolio hedges, though volatility funds don’t necessarily work best as long-term holdings, said Eric Balchunas, senior ETF analyst at Bloomberg.

“In the stock market, nothing is a better hedge than VIX,” he said. “When it comes to volatility ETFs, it’s probably wise to use them in the short term, because they have a corrosion factor.”

Buy the Ticket, Take the Ride

The funds are among the latest developments in a crypto ETF market seeking opportunities well beyond spot bitcoin, a category dominated by iShares and its $52 billion Bitcoin Trust ETF (IBIT). While there aren’t any serious threats to BlackRock’s market share, a forthcoming bitcoin ETF from Morgan Stanley will benefit from the bank’s vast network of advisors, as well as a low fee of 14 basis points. “This is probably the most interesting development in the bitcoin ETF space this year,” Balchunas said of Morgan Stanley’s entrance to the market. “Making it 14 bps completely eradicates any excuse [for their advisors] to not use the Morgan Stanley ETF.”

For the proposed bitcoin volatility ETFs, a look at the recent performance of the VIX is illuminating, he noted:

• The VIX has tumbled 24% over the past 12 months.
• But over the past month, it’s up 28%.
• The VIX rose 27% on March 6 alone, during which the S&P 500 was down less than 1%, highlighting the possible amplitude of volatility compared with a stock index.

Bitcoin by Bitcoin: Other developments include leveraged bitcoin ETFs, crypto index funds and products that mix bitcoin holdings with other assets. One big manager that has stayed out of the game until recently is T. Rowe Price, which is now preparing an actively managed crypto ETF that will invest in a variety of currencies. “Bitcoin is getting the full ETF treatment. That means leverage, that means covered calls, that means themes,” Balchunas said. “The ETF is going to bend over backward trying to throw every way to trade bitcoin at you.”

A cannabis ETF has come down from its high.

Cambria Investment Management recently announced its Cambria Cannabis ETF (TOKE) is closing up shop. Shareholders have until April 17 to sell their holdings before the fund is liquidated on or around April 24, at which point any investors still holding shares will receive cash equal to their shares’ value. The move is based on the California ETF provider’s ongoing review of its product lineup “to ensure it meets the evolving needs of its clients,” per a company statement. The ETF launched in 2019, when investor hype around marijuana was strong following Canada’s legalization of recreational cannabis. It has struggled fairly consistently since then, however, as have cannabis funds at large, amid fading excitement for the industry and regulatory barriers.

“Cannabis ETFs are tough; it’s feast or famine,” Matthew Tuttle, CEO of Tuttle Capital Management, told ETF Upside. “When the area is hot, the stocks ramp and AUM swells. But when it’s not, those stocks still have a tough time in this regulatory environment, and retail investors are fickle on the area.”

Up in Smoke

Late last year, President Donald Trump signed an executive order calling for marijuana’s reclassification from a Schedule I drug to a Schedule III drug to be expedited, which could allow for medical research for cannabinoids and reduce taxes for the industry. But as of now, marijuana is still a Schedule I drug. Not only is the regulatory environment uncertain, but these companies are also “shaky financially,” Tuttle said.

“[They] could be home runs if the regulatory chips fall in their favor, but if not, they are zeros,” he added. “From an institutional standpoint, that’s not a great trade-off. For the retail crowd, they are going to move their money to where it’s treated the best.”

TOKE isn’t the only cannabis ETF to lose its buzz of late:

• The AdvisorShares Pure US Cannabis ETF (MSOS), which VettaFi data show is the largest cannabis ETF on the market, is down roughly 30% year-to-date, while the Amplify Alternative Harvest ETF (MJ) is down 26%. Similarly, the Amplify Seymour Cannabis ETF (CNBS) dropped 28%.
• Last year, Amplify ETFs shut down the Amplify US Alternative Harvest ETF (MJUS).

Still Lit? Industry enthusiasts aren’t giving up on cannabis’ potential just yet. Aaron Edelheit, CEO of Mindset Capital, took to X to share that sentiment, despite seeing the TOKE closure. After signing on to try to “resurrect” the ETF around two years ago, his firm “continues forward with multiple private funds in the cannabis space” and remains bullish on the opportunities.