Beyond Bulls & Bears


ETF 2022 year-end report card: The grades are in!

As 2022 winds down, David Mann, Head of ETF Product & Capital Markets, assesses how the industry and his predictions for the year fared amid a turbulent market environment.

Rising Inflation. Crypto winter. Double-digit declines in many equity and fixed income indexes. I suppose it would have been nice for me to have mentioned any of those in my 2022 predictions column. But in my defense, this is an exchange-traded funds (ETF) blog, and thus macro calls on rates or broad index levels will usually not be found here.

Rest assured, the ETF machine keeps chugging along. Despite negative returns for the top 20 ETFs (by assets) for 2022, US ETF net inflows still stand at nearly $600 billion (through December 12, 2022).1 Those inflows lag last year’s pace somewhat but are still impressive given these challenging market conditions. As to how those flows impacted my grades, read on:

Prediction #1: Mutual fund-to-ETF conversions will continue to gain traction

Rating: B+

As I have mentioned repeatedly in this blog over the years, there are real benefits to the ETF structure, and some investors might value some qualities far more than others. The long-term investor might value tax-efficiency more than the short-term investor who values intraday liquidity. An institutional investor might value daily transparency for portfolio analysis more than a retail investor buying 100 shares. The $600 billion of inflows in 2022 once again demonstrates that investors love ETFs.

I thought we would see a continued trend of mutual funds looking to join the ETF party. In 2021, I counted 16 mutual funds that converted to ETFs with combined assets under management (AUM) of around $37 billion2 and predicted that number would double in 2022. I wasn’t too far off! For 2022, I count 20 new funds with total assets (including those converted in 2021) of $63 billion,3 not to mention many other asset managers who have announced their intentions to convert.

The converted assets did not quite reach my stretch prediction of $100 billion, but the doubling of both funds and assets was almost spot-on. I think a B+ is merited.

Prediction #2: Global supply chain woes to again shine light on international equity investing

Rating: B-

There are a couple of elements to this prediction worth discussing. The first is regarding global supply chain concerns and whether they have been resolved. My completely unscientific process of typing “supply chain issues” into a search engine leads me to confidently state that this is still an ongoing issue, especially given the current state of affairs with China and Russia. Since supply chain woes have not disappeared entirely, that part of the prediction is on target.

As for international investing through ETFs, I previously wrote a column about how both the underlying local equities as well as the strength of the local currency in relation to the US dollar drove returns. For 2022, I predicted significant dispersion among ETFs that provide exposure to international equity markets. While some single-country ETFs have fared much better than others (for example, ETFs that hold Mexican equities are up around 20% over those that own Japanese stocks4), I was expecting more. I do not take using the word “significant” lightly, and thus am lowering my grade to a B-.

Prediction #3: Environmental, social and governance (ESG)/sustainable ETFs will exceed $200 billion AUM

Rating: D-

In hindsight, I probably should have included European ETF assets in this prediction! To recap where we were a year ago with sustainable ETF assets, there were $38 billion of inflows and $126 billion in assets. I predicted that we would easily beat those 2021 numbers and end at over $200 billion. Well, I was WAY off on this one as there were only $2 billion of inflows, and because of the market selloff, assets are down to around $100 billion.5

The premise for my prediction was straightforward as I speculated (incorrectly) that investors could add value by adding an ESG element to their broad market and/or active exposure. What I did not expect was the extent of the backlash against ESG investing to the point that many states are now enacting ESG bans. I typically avoid wading into political waters, but I think that [redacted] in the coming months.

In summary, I really need to sharpen my pencil, as this was my worst year in quite some time! Stay tuned for 2023 predictions coming soon!


All investments involve risks, including possible loss of principal. The value of investments can go down as well as up, and investors may not get back the full amount invested. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments.

For actively managed ETFs, there is no guarantee that the manager’s investment decisions will produce the desired results.

ETFs trade like stocks, fluctuate in market value and may trade above or below the ETF’s net asset value. Brokerage commissions and ETF expenses will reduce returns. ETF shares may be bought or sold throughout the day at their market price on the exchange on which they are listed. However, there can be no guarantee that an active trading market for ETF shares will be developed or maintained or that their listing will continue or remain unchanged. While the shares of ETFs are tradable on secondary markets, they may not readily trade in all market conditions and may trade at significant discounts in periods of market stress.


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1. Source: Bloomberg as of 12/13/22.

2. Sources: NYSE Arca, NASDAQ and CBOE.

3. Sources: New York Stock Exchange, Chicago Board Options Exchange, NASDAQ, as of 12/15/22.

4. Source: Bloomberg as of 12/13/22.

5. Source: Morningstar.

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