ETF Inflows & Outflows
Performance Leaders & Laggards
Source: ETF Action; flows and performance data as of 6/13/24; performance data excludes leveraged and inverse products
Weekly ETF Reads
Fidelity secures ‘dozens’ of payment deals from ETF providers by Will Schmitt
“The decision to ramp up efforts to claw back some of the cost of providing free trading to retail investors comes even as rival Charles Schwab adopts a more cautious stance.”
Janus ETF Tracking CLOs Hits $10 Billion in Zero-Sum Race by Katie Greifeld
“The CLO category is still in its early innings.”
NY Life backs away from semi-transparent ETFs by Emile Hallez
“It’s just another piece of evidence that the non-transparent structure hasn’t taken off like a lot of people expected it to.”
Hot Funds and the Curse of ‘Self-Inflated Returns’ by Jason Zweig
“What your exchange-traded fund owns is important. Who else owns your ETF might be even more important.”
Meme Stock Performance: Did Active or Passive ETFs Fare Better? by Lan Anh Tran
“It is supposedly in these one-off, extreme events that active managers can show their edge over passive funds.”
AXS files to launch weekly, monthly and quarterly leveraged ETFs by Steve Johnson
“Anyone buying part way through a reset period would be getting either less or more leverage than this, depending on whether prices have risen or fallen in the interim.”
Themes Affiliate Applies for Single-Stock ETFs by Jeff Benjamin
“The plan is to leverage the Leverage Shares brand in the U.S. market.”
Hedge Fund Equity Expertise Accessible To All With Tremblant’s ETF by Carrie McCabe
“Instead of participating in much-higher-cost-with-less-liquidity vehicles based upon qualified purchaser rules (value of investments) or accredited investor rules (minimum annual income and net worth), an individual or entity can simply purchase the ETF shares on the NYSE.”
Crypto ETFs: Ether Not an Either/Or Story With Bitcoin by Roxanna Islam
“Ether and bitcoin have two very different use cases.”
ETF Tweet of the Week
Morningstar’s Ben Johnson goes back-to-back on “Tweet of the Week” with an interesting look at ETF closures. Why is this relevant? BlackRock announced this week that it will be closing the iShares Frontier and Select EM ETF (FM), which has nearly $430 million in assets (and charges a rather hefty 0.79% fee). At its peak in 2014, FM had $840 million in assets and was actually around $725 million just last year.
The fund has been challenged to say the least, underperforming the S&P 500 by over 300%(!) since its 2012 inception. The ETF also underwent an index change in 2021 and transitioned to an actively managed strategy about a year ago. It seems clear there were some liquidity issues when it came to managing the underlying holdings. Morningstar’s Johnson had this to say to Pensions & Investments:
“This is a very difficult fund to run. FM is a fairly large fish in what I wouldn’t even typify as a pond but more so a puddle when you look at the size of the underlying market.”
The fund will be wound down over an extended period of time. iShares:
“Currency conversions, including conversion of Nigeria’s currency, the Naira, will impact the timing of the Fund’s liquidation. As a result, the Fund has entered into an extended liquidation period.”
The disclosure goes on:
“It is expected that the Fund will hold a substantial majority of its assets in cash and cash equivalents during the extended liquidation period. After market close no earlier than August 12, 2024, but on a date as soon as practicable, the Fund will cease trading and the creation and redemption of Creation Units. Currently, the Fund expects the last trading date to be on or around March 31, 2025, and the liquidation date to be three days after the last trading date.”
There were 17 now-dead ETFs that had peak assets under management that were greater than $FM's $428.4 Mil in AUM as of the time of the announcement of its pending liquidation earlier this week. pic.twitter.com/94usXwBusu
— Ben Johnson, CFA (@MstarBenJohnson) June 12, 2024
ETF Chart(s) of the Week
ETFs saw $92 billion in May inflows, taking the industry’s year-to-date haul to over $320 billion (now two weeks into June, inflows sit at $350bil). Some perspective via State Street’s Matt Bartolini:
“The $92 billion was the month of May’s best ever, and ninth-most ever overall for any month. It also pushed 2024 totals to over $320 billion. This translates to a pace of $64 billion a month this year, which could add up to a $770 billion end-of-year total. Of course, this assumption doesn’t account for the typical seasonally fueled second-half bump each year. Add the usual 31% bump for second-half inflows, and 2024’s inflows could be the second-most ever at $890 billion (see first chart below), with a real puncher’s chance at being the most ever.”
You read that correctly. It is possible ETFs could challenge 2021’s record $908 billion in annual inflows. Regardless, there is clearly strong momentum within the industry. Several other noteworthy stats from Bartolini:
“Bond ETFs took in $28 billion, their seventh-best month ever, for a total of $94 billion for 2024. If this pace continues, bond ETFs could take in $223 billion this year, their most ever and their fourth year in the past five with over $200 billion of inflows.”
“Active ETFs added $22 billion; their 50th consecutive month with inflows was the third-most ever.”
Speaking of ETF industry growth, check out the second chart below courtesy of Bloomberg – who predicts global ETF assets will nearly triple from $13 trillion to $35 trillion by 2035.
Source: State Street’s Matt Bartolini
Source: Bloomberg’s Eric Balchunas
Thinking Crypto Podcast
I recently had the pleasure of joining the Thinking Crypto Podcast and Host Tony Edwards to discuss all things crypto ETF-related. Enjoy!
