ETF Inflows & Outflows
Performance Leaders & Laggards
Source: ETF Action; flows and performance data as of 10/1/26; performance data excludes leveraged and inverse products
Weekly ETF Reads
Treasury Sec. Bessent, IRS crack down on ETF strategy the wealthy are using to avoid capital gains taxes by Cheryl Winokur Munk
“The IRS’s revenue ruling related to a transfer of a portfolio of securities to a newly formed ETF.”
‘Black Holes’ for Capital-Gains Tax Come Under Treasury Fire by Justina Lee and Denitsa Tsekova
“You probably shouldn’t take 100 US stocks, dump into an ETF, and turn it into international bonds a week into the trade.”
Ketchup bottles and Terrordomes: The slow-burn launch of ETF share classes by Caroline McCarthy
“What you see is … the same exact content, just a more modern, more convenient, more effective wrapper.”
As ETFs Mature, Institutional Allocators Finding New Roles for Them by Bailey McCann
“There is more customization available than we’ve ever had in ETFs right now.”
Simplify Tops Madison Dearborn With a Rival Bid for USCF by Sumit Roy
“The episode underscores how sought-after even a mature commodity ETF suite has become.”
With Hester Peirce’s SEC Exit, Crypto Industry Loses an Ally by Mallika Mitra
“She publicly criticized her own agency’s early rejections of spot bitcoin ETFs.”
Bitwise launches first US spot NEAR ETF with staking rewards by Jason Shubnell
“The firm is positioning as infrastructure for an emerging AI-powered economy.”
ETF Post of the Week
Back in July, Treasury Secretary Scott Bessent indicated the department would “not turn a blind eye to abusive Wall Street tax dodges or tolerate products designed to exploit our federal tax code.” This past week, he followed through on that warning by taking aim at 351 exchanges.
If you’re unfamiliar with 351 exchanges as they relate to ETFs, here’s how I’ve described them in the past:
“Let’s say an investor has a sizeable individual stock portfolio held in a taxable account. Let’s also assume those stocks have large capital gains overall. If the investor were to sell positions, they would be on the hook for paying taxes to Uncle Sam. A 351 exchange allows this investor to instead contribute those stocks into an ETF. Instead of owning a portfolio of individual stocks, the investor now simply owns ETF shares. Importantly, this investor doesn’t pay any taxes until they actually sell those ETF shares. There’s another benefit. It’s possible (likely) their individual stock portfolio had become overly concentrated because remember… if they sold positions, they paid taxes. However, the ETF shares they now hold can allow for greater diversification via the magic of creation and redemption. Their legacy individual stock holdings will be swallowed into a broader ETF and ultimately purged as necessary. Plus, the investor will receive the tax benefits of the ETF structure itself.“
At the time, I didn’t expect the Treasury Department to make significant changes, though I did indicate there would likely be increased scrutiny of issuers pushing the boundaries. Last week’s Treasury notice and associated IRS revenue ruling had more teeth than I anticipated, but the guidance is clearly targeted at issuers taking a more aggressive approach to 351s. That said, the Treasury’s “guidance” also left a lot to be desired in terms of explaining where exactly the boundaries lie.
I think the short-term takeaway is to expect a temporary slowdown in 351 exchanges, a corner of the ETF industry that has grown to more than $22 billion in assets.
If you’re interested in additional detail on this topic, I would encourage you to read the first two articles above from CNBC and Bloomberg.
Today, @USTreasury and @IRSnews issued a notice on tax-motivated investment strategies that makes clear Treasury is serious about cracking down on transactions designed to dodge taxes or exploit our federal tax code. The companion Revenue Ruling also takes on prearranged §351 ETF… https://t.co/F8ZJQcx2B9
— Treasury Secretary Scott Bessent (@SecScottBessent) September 28, 2026
ETF Chart of the Week
The ETF industry seemingly sets some sort of new record every other week, but this one caught my attention. Strategas’ Todd Sohn notes that over 100 thematic ETFs have launched this year, already shattering 2025’s annual record. Not only that, but there are a boatload of thematic ETF filings currently in the hopper with the SEC. Products tied to the artificial intelligence theme (think memory, photonics, energy, and other AI infrastructure plays) are a clear driver, along with robotics and space ETFs. Corgi alone is responsible for 24 of these launches.
Given that the most successful ETF launch of 2026 is a thematic ETF – the Roundhill Memory ETF (DRAM) – don’t expect this trend to slow down anytime soon.
Source: Strategas’ Todd Sohn
ETF Prime Podcast
Last week’s ETF Prime featured Ben Sklar, Portfolio Manager – Index & Derivative Solutions at AllianceBernstein, and Bill Perkins, Founder & Chief Investment Officer at Skylar Capital Management. Ben discussed the firm’s unique suite of buffer ETFs and previewed a forthcoming premium income ETF. Bill spotlighted the first-of-its-kind Skylar Electricity Futures ETF (MWHS) and explained how artificial intelligence and robotics could drive the next wave of electricity demand.
Crypto Prime Podcast
John Hoffman, Head of Product Portfolios at Ondo Finance, joined me on last week’s Crypto Prime to discuss how the firm’s tokenization platform works, its recent collaboration with BlackRock to bring model portfolios onchain, the evolving regulatory landscape for tokenized assets, and where the technology is headed.
