ETF Inflows & Outflows
Performance Leaders & Laggards
Source: ETF Action; flows and performance data as of 5/16/24; performance data excludes leveraged and inverse products
Weekly ETF Reads
China and ESG ETF closures soar in face of political backlash by Steve Johnson
“Both have become political footballs.”
Billions Exit Thematic ETFs as Traders Move On From Buzzy Themes by Isabelle Lee
“Thematic allocations were all the rage during the stay-at-home trading boom three years ago, when interest rates were at historic lows.”
Behind the Curtain: ETF Distributions by Will Hershey
“ETF investors need to understand the mechanics of ETF distributions before considering an investment. As with everything in markets, there is no free lunch – but rather an exchange of risk.”
Vanguard chooses former BlackRock executive as its next CEO by Joseph N. DiStefano
“Ramji was head of BlackRock’s iShares and Index Investing Group, competing head-to-head against Vanguard’s top products.”
Asset managers lining up to offer ETF share class by Ari I. Weinberg
“In just the past few weeks, AllianceBernstein and Neuberger Berman have added their names to a list that already includes Dimensional, Fidelity and PGIM, among others.”
As a Pension Embraces Bitcoin, Hope Grows for Cryptocurrency’s Long-Term Prospects Even Among Conservative Pros by Helene Braun
“The U.S. state of Wisconsin’s pension fund disclosed in a quarterly filing that it had stashed about $160 million into bitcoin ETFs from BlackRock and Grayscale by the end of March.”
Why the SEC could choose to deny ether ETFs, and what could happen next by Ben Strack
“We think the SEC may use any reason, not necessarily a logical one, to disapprove.”
ETF Tweet of the Week
Here’s something you don’t see everyday… an issuer filing for 50(!) ETFs. In this case, Tradr ETFs is seeking to launch a suite of leveraged and inverse ETFs that reset at weekly, monthly, and quarterly intervals.
As Morningstar’s Ben Johnson colorfully stated:
“That BOOM you hear is the biggest-ever volley fired by the ETF spaghetti cannon–ready…FIRE…aim!!!”
BOOM!
— ETF Hearsay by Henry Jim (@ETFhearsay) May 16, 2024
Tradr, AXS' new brand of ETFs, does ETF Big Bang and files 50 Weekly, Monthly, and Quarterly resets for double leveraged and inverse funds on 10 ETFs as well as $NVDA and $TSLA
Tradr 2X Long SPY Weekly ETF | SPYB
Tradr 2X Long SPY Monthly ETF | SPYM
Tradr 2X Long SPY… pic.twitter.com/AFdUdfVvnp
ETF Chart of the Week
Actively managed ETFs remain a hot story in the industry… and rightfully so. The segment continues to see outsized inflows, the majority of new ETF launches are active, and a shifting market environment has investors looking beyond index-based strategies. A virtuous circle has developed where the greater supply of active ETFs (in particular, from traditional active shops now offering their best portfolio managers and strategies in an ETF wrapper) and shifting markets (think higher interest rates, inflation, etc) are contributing to the outsized inflows. Those inflows are a pretty good incentive for issuers to launch more products. Greater active ETF supply is then leading to greater investor demand. Around and around we go.
Plus, it’s not like issuers have any interest in competing against Vanguard or iShares by launching another S&P 500 index ETF or smart beta value ETF. Instead, they can attempt to innovate and carve out a niche with active strategies. As an aside, I talked about all of this last week during the SS&C ALPS Advisors Virtual Summit (which you can still watch on demand).
That said, competition in the active ETF space isn’t exactly wide open. Three firms – Dimensional, JPMorgan, and First Trust – already control nearly 50% of the active ETF market. Over the past year, those three firms’ active ETFs had organic growth rates of 40%, 37%, and 21%, respectively. That’s stout competition. The top ten active ETF issuers control about 75% of the segment.
A microcosm of this dominance can be found in the active small cap equity space, where Strategas’ Todd Sohn notes that Dimensional and American Century (via their Avantis suite of ETFs), account for 87%(!) of the category’s $36 billion in assets.
What am I trying to get at here?
There is definitely plenty of opportunity for issuers to compete in active ETFs, but that doesn’t mean it will be easy.
Source: Morningstar’s Gabe Alpert
