Exchange-traded fund flows surpassed $500 billion in the first three and a half months of 2026 as the industry continues its rapid expansion with more than 300 new launches and record trading volumes.
Key Takeaways:
- ETF flows exceeded $500 billion in the first three and a half months of 2026. This includes more than 300 new fund launches.
- ETFs represented 40% of total market trading volume in March 2026, up from a 30% average in 2025.
- Semiconductors now account for 16% of the S&P 500, rising from zero percent in 2003.
Todd Sohn, chief ETF strategist at Strategas, joined Nate Geraci on ETF Prime to share the figures. ETFs accounted for 40% of total market trading volume in March 2026. This went up from an average of 30% of the market flows in 2025, according to Sohn.
See more: ETF Prime: Davis Touts Active Management Amid Market Paradox
The surge in activity has produced both breakout hits and a growing population of struggling funds, according to Sohn. The Roundhill Memory ETF (DRAM) emerged as a surprise with nearly $700 million in assets just two weeks after launch.
Semiconductors now represent 16% of the S&P 500, up from zero percent in 2003, Sohn said on the podcast. The shift reflects how chip makers have become central to technology infrastructure and artificial intelligence (AI) development.
The thematic ETF landscape shows signs of overcrowding in some categories. Six space-related ETFs launched recently, including the Roundhill Space & Technology ETF (MARS), the Tema Space Innovators ETF (NASA), and the Procure Space ETF (UFO), according to Sohn. He expressed skepticism that the market can support that many niche players in the space economy sector.
Zombie Funds & New Competition
On the other end of the spectrum, 70% of leveraged single-stock ETFs hold less than $25 million in assets, Sohn said. The average lifespan of a liquidated ETF in 2026 has dropped to just one year and nine months.
Meanwhile, competition is intensifying among established products. iShares and State Street filed for Nasdaq 100 ETFs to compete with Invesco’s QQQ Trust (QQQ), according to Sohn. He expects the new entrants to undercut QQQ on fees.
Morgan Stanley launched its spot bitcoin fund, the Morgan Stanley Bitcoin Trust ETF (MSBT), more than two years after the first spot products came to market. Sohn said the firm is viewing crypto “for the long run” as an asset class too large to ignore. The fund entered as a low-cost option, and Geraci noted that Morgan Stanley is “leading with crypto” on its homepage.
The Breakaway Tanker Shipping ETF (BWET) posted the best performance of any ETF in 2026, rising 725%, yet has attracted only $2 million to $3 million in inflows. Sohn suggested the rapid gains may have scared investors away, with some thinking the fund “only has one way to go and that’s down.”
For more news, information, and analysis visit the Thematic Investing Content Hub.
Originally published on ETF Trends
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