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Exchange-traded fund (ETF) flows surpassed $500 billion in the first three and a half months of 2026, underscoring the industry’s rapid expansion. The period also saw more than 300 new ETF launches alongside record trading volumes, according to ETF strategist Todd Sohn of Strategas.
Sohn said ETF flows exceeded $500 billion in the first three and a half months of 2026, driven by more than 300 new fund launches.
He also cited trading-volume momentum: ETFs accounted for 40% of total market trading volume in March 2026, compared with an average of 30% in 2025.
The surge in new launches has produced both breakout performers and a growing number of funds struggling to gain traction. Sohn pointed to the Roundhill Memory ETF (DRAM), which amassed nearly $700 million in assets just two weeks after launch.
On broader market exposure, semiconductors have become a larger share of major benchmarks. Sohn said semiconductors now represent 16% of the S&P 500, up from zero percent in 2003, reflecting the sector’s growing role in technology infrastructure and artificial intelligence (AI) development.
Sohn said some thematic areas are becoming crowded. He noted that 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). He expressed skepticism that the market can support that many niche players in the space economy sector.
Alongside new competition, Sohn highlighted challenges for smaller funds. He said 70% of leveraged single-stock ETFs hold less than $25 million in assets.
He also reported that the average lifespan of a liquidated ETF in 2026 has fallen to one year and nine months.
Competition among established ETF providers is increasing. Sohn said iShares and State Street filed for Nasdaq 100 ETFs to compete with Invesco’s QQQ Trust, and he expects the new entrants to undercut QQQ on fees.
In crypto-related products, Sohn discussed Morgan Stanley’s entry into spot bitcoin. He said the Morgan Stanley Bitcoin Trust ETF (MSBT) launched more than two years after the first spot bitcoin products entered the market. Sohn said Morgan Stanley is viewing crypto “for the long run” as an asset class too large to ignore, and he noted that the fund entered as a low-cost option. Geraci added that Morgan Stanley is “leading with crypto” on its homepage.
Sohn also cited the Breakaway Tanker Shipping ETF (BWET), which posted the best performance of any ETF in 2026, rising 725%. Despite that gain, it has attracted only $2 million to $3 million in inflows. Sohn suggested the rapid rise may have deterred investors, with some viewing the fund as having “only one way to go and that’s down.”
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