This week, BlackRock unveiled a high conviction artificial intelligence (AI) ETF as the firm looks to expand its active offering.

The iShares AI Innovation Active UCITS ETF (IART) is a concentrated ‘best ideas’ portfolio of 20-40 stocks and builds on a recent expansion of concentrated active ETF launches in Europe.

BlackRock also launched a systematic factor rotation ETF - iShares World Equity Factor Rotation UCITS ETF (FACT) – in conjunction with IART’s launch.

IART’s debut not only continues BlackRock's rollout of active strategies but also sustains its recent focus on the AI theme, following the launch of both an AI infrastructure ETF and an AI adopters and applications ETF last year.

BNP Paribas Asset Management (BNPP AM) also added to its active ETF range this week with the launch of a Europe equity ETF.

Thematic ETFs see first annual outflows in a decade

European thematic ETFs faced their first net outflows in a decade, seeing €1.1bn outflows in 2024 despite a record €247bn in overall European ETP inflows in the same year.

Technology and clean energy ETFs struggled due to rising financing costs and sector challenges, while AI and big data funds failed to counter losses from cybersecurity and robotics.

Contrasting technology and clean energy, defence ETFs saw a spike in demand last year, attracting €1.7bn in 2024 amid increased national security spending.

While the outflows appear concerning, Raymond Backreedy, chief investment officer at Sparrows Capital and Kenneth Lamont, principal at Morningstar agreed that the outflows were more evidence of market fluctuations rather than long-term decline.

Thematic ETF’s struggle across 2024 was further evidenced by ARK’s slow start after its European debut in April, with the three ETFs in total seeing a combined $16.7m inflows less than four months after their launch.

Russell US indices to rebalance twice a year

Starting November 2026, Russell US indices will shift from annual to semi-annual rebalancing due to “market dynamics and increased volatility”, FTSE Russell said.

Market cap-weighted indices, like the Russell 2000, will rebalance in both June and November, while style indices – like the Russell 2000 Value - will adjust fully in June but incorporate changes in November.

As of December 2023, $10.6trn in assets were benchmarked to Russell US indices, with $2trn managed passively. By September 2024, ETFs tracking these indices held $658bn.