ETF Inflows & Outflows
Performance Leaders & Laggards
Source: ETF Action; flows and performance data as of 8/21/25; performance data excludes leveraged and inverse products
Weekly ETF Reads
Boom in Bespoke ETFs Drives Growth of Niche ‘A-La-Carte’ Options by Yiqin Shen and Bernard Goyder
“Their popularity is largely tied to the blistering growth in the defined-outcome exchange-traded funds.”
Defined Outcome ETFs: From Niche to Toolkit by Roxanna Islam
“There are now over 400 defined outcome ETFs.”
BlackRock’s Nagrath says the rapid rise of fixed income ETFs has new heights to reach by Steve Randall
“We see the bond ETF industry becoming a $6 trillion industry by 2030.”
ETF Usage Varies Widely Among Top RIAs by David Bodamer
“Advisor allocations to ETFs rose to 32.6% of AUM, up from 23.6% in 2023.”
How wealthy investors use ETFs to skirt capital gains taxes. The strategy is ‘like magic,’ advisor says by Kate Dore
“You have to be happy with the ETF.”
ETFs Offer Gateway to Once-Inaccessible Private Markets by Cinthia Murphy
“Pursuing direct access to a new frontier such as private markets may cause a little discomfort. Most disruptive innovation usually does.”
PRIV: One Year Later by Phil Bak
“The ETF ecosystem and the broader market are getting murkier and many of the new products being launched are targeted and marketed in a way that promotes fee extraction.”
Vanguard Boldly Pushes Into A Nearly Taboo Area — Higher Fees by Matt Krantz
“These new active ETFs will be priced higher than Vanguard’s index-based products, but they are expected to be competitively priced compared to other active offerings on the market.”
How to Judge an Active ETF by Robby Greengold
“Done wrong, it can leave you paying more—in implicit costs and frustration—than you expected.”
Cathie Wood’s ARK ETFs: From Record Inflows to Record Outflows by Sumit Roy
“Heartbeat trades are a tax trick.”
(Note: In last week’s ETF Buzz, I highlighted the record inflows into ARKK. As it turns out, they were simply the result of heartbeat trades. For the record, I had flagged this as a possibility on ETF Pulse (RIP) several weeks ago.)
ETF Post of the Week
The explosive growth of covered call and other options-based ETF strategies in recent years has been driven by investor appetite for high yields and enhanced income. As these products have multiplied, so too has the capital flowing into them. But lately, these strategies have come under increasing scrutiny for delivering disappointing after-tax performance.
QVR Advisors’ Benn Eifert puts it bluntly:
“Selling that call is just a trade. You’re going to lose money on that trade if the stock goes up enough. And if the stock is volatile—goes up a lot and then down a lot—you’re going to get hosed. Because when it goes down a lot, you just collect a small premium, but when it goes up a lot, you get your face ripped off. This is the precise nature of a short volatility trade.”
Morningstar’s Jeffrey Ptak adds:
“The manager can more-or-less choose the monthly or weekly distribution rate it likes. Then it’s a simple matter of multiplying that rate by twelve and dividing that product by the most recent NAV. Just like that, the ETF has a huge “yield”. But in most instances the income the ETFs earn from writing options falls far short of what’s needed to fund the distributions. Absent that, the ETFs are reliant on the stock to appreciate in order to plug the gap between the distribution rate the manager has set and the option income it’s collected. And on most occasions they’ve fallen short.”
At the core, critics highlight two main issues: 1) Chronic underperformance relative to the underlying stocks or benchmarks these ETFs track, and 2) High tax cost ratios, which further erode already-lagging returns.
A recent example from EconomPic on X illustrates the issue:
12-month returns thru 7/31/25:
Coinbase (COIN) +68%
YieldMax COIN Option Income Strategy ETF (CONY) +32%
After-tax pre-liquidation CONY -12%
These ETFs are doing exactly what they’re designed to do – harvest option premiums to deliver income. But that comes with tradeoffs: capped upside, significant tax drag, and often, underperformance. The real question is whether investors fully understand the structure – or are just chasing yield.
As Morningstar’s Amy Arnott reminds us:
“Ultimately, the famous quote from Legg Mason strategist Raymond DeVoe, Jr. bears repeating: More money has been lost reaching for yield than at the point of a gun.”
ETF Chart of the Week
State Street’s latest ETF Impact Report is out and it comes with a prediction that global ETF assets could reach $54 trillion by 2035.
$54 trillion!
Assets currently sit near $15.5 trillion.
In other words, the ETF party is far from over – even with my bullishness on tokenization.
Source: State Street Investment Management
ETF Prime Podcast
Last week’s ETF Prime featured Todd Rosenbluth, Head of Research at VettaFi, offering an in-depth look at the forthcoming multi-share class structure and what it means for both investors and fund issuers. Paul Baiocchi, Chief ETF Strategist at SS&C ALPS Advisors, explored the key trends driving the next wave of ETF growth and innovation.
Crypto Prime Podcast
Tyrone Ross, CEO & Founder of Turnqey Labs and CEO of 401 Financial, joined me on last week’s Crypto Prime to highlight the intersection of crypto and wealth management. He also unpacked the pros and cons of spot crypto ETFs, explored how traditional brokerages are evolving in the crypto space, and discussed what tokenization could mean for the future of investing.
