ETF Inflows & Outflows
Performance Leaders & Laggards
Source: ETF Action; flows and performance data as of 6/27/24; performance data excludes leveraged and inverse products
Weekly ETF Reads
Is the Tail Wagging the CALF? by Sumit Roy
“The total market cap of the S&P Small Cap 600—the index from which CALF pulls its 100 holdings—is $1.2 trillion. That’s less than the market cap of Meta and less than half the market cap of Microsoft, Apple or Nvidia.”
Nvidia Retail Craze Unleashes Big Moves in the World of ETFs by Vildana Hajric and Denitsa Tsekova
“Only 96 out of 2,000 equity ETFs with low-to-no exposure to Nvidia have managed to outperform the S&P 500 since the company’s initial eruption as an AI bellwether last year.”
Investors Go Way Off Beaten Path To Score Giant Bond Returns by Matt Krantz
“That blows away the 0.07% return this year by the iShares Core US Aggregate Bond ETF (AGG), which serves as a benchmark for the entire U.S. bond market.”
The 2 ETFs That Track Congressional Stock Trades by Zachary Evens
“Their portfolios are useful for understanding where members of Congress choose to invest their money, but the jury is out on their long-term investment merit.”
ETF Launches Dwarf Mutual Fund Starts by Jeff Benjamin
“Just as we once marveled at the multitude of smartphone apps for every need, we now see a similar trend with ETFs.”
Bitwise CIO predicts spot Ethereum ETFs will attract $15 billion of net inflows in 18 months by James Hunt
“Spot Bitcoin ETFs reached $15 billion of net inflows earlier this month after five months of trading.”
ETF Tweet of the Week
While the industry is awaiting the launch of spot ether ETFs – which could be any week now – VanEck and 21Shares have decided to keep the crypto ETF party going strong by filing for spot solana ETFs.
Matthew Sigel, Head of Digital Assets Research at VanEck, does an excellent job of laying out the rationale for their filing in the below tweet (click to read entire thread). While many believe the lack of CME-traded solana futures may prevent spot ETFs from coming to market, Sigel told Bloomberg that is not necessarily the case:
“For its part, VanEck said an active futures market isn’t necessary for an ETF to be approved. ETFs in shipping, energy and uranium already exist, even though related futures market volume is immaterial, according to Matthew Sigel, head of digital asset research at VanEck. And Solana is decentralized, a major factor in the approval, he said.
‘We think it can get done without a CME futures contract,’ Sigel said in an interview. Market surveillance-sharing agreements with centralized exchanges could be used instead, he said.”
Bloomberg’s James Seyffart noted that VanEck might also be betting on shifting political winds:
“I think VanEck’s filing is a sort of call option on the November election. Under the current SEC administration – based on years of prior approval and denial orders for crypto ETFs – a solana ETF should be denied because there is no federally regulated futures market. But a new admin in the White House and a new SEC admin that’s more amenable to crypto policies could change that calculus.”
I agree with both and offered some additional thoughts on the topic that you can read here.
I am excited to announce that VanEck just filed for the FIRST Solana exchange-traded fund (ETF) in the US.
— matthew sigel, recovering CFA (@matthew_sigel) June 27, 2024
Some thoughts on why we believe SOL is a commodity are below.
Why did we file for it?
A competitor to Ethereum, Solana is open-source blockchain software designed to… pic.twitter.com/XwwPy8BXV2
ETF Chart(s) of the Week
While not specifically ETF-related, the below charts could have meaningful implications for the industry. There is now over $6 trillion in money market funds, a figure that has substantially increased over the past two years. Higher short-term interest rates resulted in investors moving money out of cash (or elsewhere – sometimes with an opportunity cost I might add) and plowing it into these vehicles. Who can blame them?
Money market funds yielding north of 5% with minimal risk look pretty attractive after a decade-plus of historically low interest rates. But what happens if the Fed finally pivots and cuts interest rates… and does so quickly? That could be a catalyst for investors to start moving money out of these funds and into other vehicles – including ETFs. My guess is that a decent chunk of this money could find a home in longer-dated bond ETFs in particular. As a matter of fact, there was recently a $2.7 billion inflow into the iShares 20+ Year Treasury Bond ETF (TLT) – the biggest one-day inflow since the ETF’s 2002 inception. Not investment advice, but it isn’t hard to make a case that investors should at least consider locking-in higher rates via longer-dated bonds right now. Why?
This is only a single snapshot in time, but the below chart courtesy of BlackRock shows how quickly money market returns can fall:
Regardless, if rates do start coming back in, my expectation is that money will begin fleeing money market funds and ETFs could be one of the biggest beneficiaries.
(Note: I discussed this topic and much more on last week’s ETF Prime with Dhruv Nagrath, Director of Fixed Income Strategy at BlackRock.)
Source: Wall Street Journal’s Vicky Ge Huang
ETF Meme of the Week
I couldn’t resist including a bonus feature this week, which is the below meme (or whatever you want to call it) from Bloomberg’s Eric Balchunas. As far as I’m aware, Eric coined the phrase “hot sauce in a portfolio” years ago. The basic concept is that 90%+ of a prudent investor’s portfolio allocation should be in plain-vanilla, low cost funds – think “Vanguard-esque”. However, many investors also like to spice things up a little and that’s where porfolio “hot sauce” comes into play – think ARK ETFs, crypto ETFs, etc. ETF nerds will absolutely love this one…
