ETF Inflows & Outflows
Performance Leaders & Laggards
Source: ETF Action; flows and performance data as of 6/20/24; performance data excludes leveraged and inverse products
Weekly ETF Reads
ETFs could seize half of current US mutual fund assets, says Citi by Steve Johnson
“$6tn to $10tn of the remaining money in long-term mutual funds is at risk of capture by ETFs.”
Vanguard Cuts Into iShares’ ETF Lead as Inflows Climb by Ron Day
“They stuck to their knitting.”
Retail Funds Dive Into Quant-Factor ETFs After $48 Billion Haul by Isabelle Lee and Denitsa Tsekova
“Of the more than 900 smart-beta ETFs, about 600 have no exposure to the Magnificent 7 stocks.”
Allspring braces to leap into active ETF space by Leo Almazora
“Aside from Allspring, Principal Global Investors, which already offers active ETFs, and Charles Schwab also filed their own requests this week with the SEC to launch their own dual share class ETFs.”
These Hot New Funds Are ‘Boomer Candy’ for Retirees by Jack Pitcher
“A good chunk of the ETF industry is in the lab trying to design more of these funds as we speak.”
The ETF Innovation Black Hole by Dave Nadig
“Innovation is still happening inside the four walls of the established ETF ecosystem. But the structure itself? Late-Stage.”
Ether ETF’s Lack of Staking Won’t Dampen Strong Institutional Demand, 21Shares’ Ophelia Snyder Says by Jamie Crawley
“One of the things that people forget is that staked assets have an impact on liquidity.”
What Will Allocations Look Like in Combined Bitcoin and Ethereum ETFs? by Juan Aranovich
“The introduction of combined BTC and ETH ETFs is significant for several reasons.”
ETF Tweet of the Week
With spot ether ETF approval expected any day now, issuers are beginning to ramp up their marketing efforts. VanEck rolled out an “enter the ether” campaign towards the end of May. Now comes Bitwise, who fired their opening salvo with the first national TV spot minted as an NFT.
This is no time for issuers to sleep.
Unlike Big Finance, Ethereum doesn't clock out at 4 p.m. pic.twitter.com/0gCJi3wlXp
— Bitwise (@BitwiseInvest) June 20, 2024
ETF Chart(s) of the Week
The $80 billion Technology Select Sector SPDR ETF (XLK) underwent a massive rebalance on Friday, selling around $11 billion in Apple shares and purchasing roughly $10 billion in Nvidia. Long story short, fund diversification rules require that stocks with greater than a 5% weighting cannot comprise more than 50% of the total fund portfolio. If that happens, XLK’s specific index methodology states that the smallest companies at the top of the portfolio will be reduced back to an initial 4.5% weighting. Nvidia passing both Apple and Microsoft in market cap value and XLK’s June 21st rebalance date created a perfect storm.
The below chart courtesy of Bloomberg’s James Seyffart lays out the situation well. Prior to the rebalance, Microsoft and Apple were the two largest holdings in XLK (see “Current Weights”). Because Nvidia surpassed Apple in market cap – and because Microsoft has a larger market cap than Apple – XLK was required to rebalance Apple to a 4.5% weighting and increase Nvidia to 21%.
The second chart from Morningstar’s Bryan Armour shows how XLK’s exposure to Microsoft, Apple, and Nvidia compared to several other tech ETFs pre-rebalance. With Nvidia up 156% year-to-date, XLK’s smaller exposure had the ETF trailing its competitors performance-wise.
(Note: I’ll be discussing this topic in-depth with VettaFi’s Roxanna Islam on next week’s ETF Prime).
Source: Bloomberg’s James Seyffart
Source: Morningstar’s Bryan Armour
