00:00Volatility has picked up. We saw the VIX get to 25 on Thursday. There's a rotation to safety.
00:05Gold is going gangbusters. U.S. Treasury yields are down to multi-year lows.
00:09The S&P 500's best performers this year are utilities and health care.
00:13How are ETF flows reflecting this, what seem to be increased skittishness?
00:17First of all, I think flows are just incredible when you think about shattering that $1 trillion mark.
00:23It's just kind of hard to get your mind wrapped around.
00:26So we're seeing flows across almost everything as far as the ETF structure is concerned.
00:31But certainly we are seeing some clients that are looking to reposition themselves and certainly some of the products that offer some downside protection
00:39and also some fixed income products that are going to the shorter end of the curve as well,
00:43especially given where rates are looking to head going forward through the end of the year and into next year.
00:48Well, that's the thing, Ben.
00:50I think it's so interesting that at the same time you're seeing so much money shoveled to just, you know, equity exposure.
00:56You still have a lot of money going into GLD, as we just showed, also into sort of the short-term cash-like ETFs.
01:05It's hard to make it make sense, for lack of a better term, the fact that you do have this really risk-on appetite
01:10at the same time where it seems like people are reluctant to give up or even stop going into maybe those more haven-like ETFs.
01:17Well, you're seeing a little bit of everything.
01:19Again, you are seeing some of that risk-on-trade, of course, in the flows that we see.
01:24But also, again, there is some conservative positioning.
01:27I think on the short-term cash products or money market-like ETFs, certainly some of that is a structural play.
01:35It's investors looking to rotate out of money market mutual funds and maybe pick up a little more yield on some of these products
01:41and really serve as a replacement or an enhancement to what they're already doing to that $7 trillion we're seeing
01:47and growing into those money market funds to date.
01:50The debasement trade was all the talk about two or three weeks ago.
01:54This idea that people want to de-dollarize or de-risk their portfolios, go into gold, go into Bitcoin,
02:00anything to get away from U.S. dollar assets.
02:02But you look at Bitcoin over the past weeks and it's really struggled since that weekend sell-off.
02:06How is this affecting the release of new products tied to crypto?
02:10It's a great question.
02:12Look, again, from an ETFs industry standpoint, we are once again at a record.
02:17That's kind of been the headline of this year.
02:19Over 800 new products launched.
02:22And certainly, crypto is one of those sort of aspects of the industry that is seeing a lot of product development.
02:29There's more than 100 pending filings with the SEC.
02:33And we do expect those to continue to come out.
02:36These are for both spot crypto, different asset types, but also different variants that are giving investors more choice,
02:44whether it's crypto with yield or crypto with downside protection or leverage crypto.
02:49I think we're going to see a little bit of everything, even despite backing off its all-time high.
02:55The appetite for those products is continuing to grow.
02:57Well, Ben, speaking of the SEC, something amazing happened in the past couple of weeks
03:01where we finally saw the SEC give the green light specifically to Dimensional to launch ETF share classes of their existing mutual funds.
03:09Dimensional has, of course, gotten that okay.
03:11We know that there's been a whole raft of applications from the ETF issuer landscape here.
03:18I'm curious where this goes from here.
03:20Now that we do have the initial, okay, the blessing from the SEC,
03:25there's a lot of concerns as to whether the plumbing of the industry is able to handle this.
03:30And I wonder where you fall on that question.
03:32This is the multi, multi-billion dollar question that everybody is asking.
03:36So, look, it's very disruptive and it could be a game changer.
03:40But we think this trend is going to take some time to really play out.
03:44And I think part of it is really that infrastructure or plumbing, if you will, to be able to facilitate all of this.
03:50First of all, just getting all these products to market,
03:52but also the process in which all of the asset managers need to go through to figure out what does make a good ETF share class,
04:00because they're not all created equal and not all funds make sense as far as having an ETF share class attached to it,
04:08but also just the platforms and the ability to actually process what we anticipate will be a number of exchanges coming from the mutual fund into the ETF.
04:19And, again, that's going to take some time.
04:21And there's a lot of automation and technology that needs to be built to facilitate it.
04:25So, huge trend, but it will take some time to play out.
04:29So, earnings season is now in full swing here in the U.S.
04:31We saw big banks surprised to the upside.
04:33Regional banks had some credit, you know, concerns that popped up.
04:36And now it's the start of tech earnings season with Netflix, Tesla, and Intel due to release in the coming days.
04:42How big a trading event are earnings for an ETF crowd that's increasingly got more complex tools at their disposal?
04:49I think in some ways, like, you see the trading volume continue to spike.
04:53And especially what we've seen the last, you know, this year and really the last quarter,
04:58ETFs have been bouncing around between 30% to 40% of the market volume.
05:02Incredible to think about how much volume and, you know, how investors are actually using these products to position around earnings.
05:10And it's just giving investors more choice.
05:12So, now you have the single stock ETFs.
05:14You have leveraged versions of those single stock ETFs up and down.
05:17But also, the ETF structure is, as you know, transparent and allows investors to look through to understand what assets or what stocks are in these products
05:28so they can position their portfolios accordingly and play those earnings.
05:33And we see literally a little bit of both or a little bit of everything when it comes to ETF investors and looking forward to earnings.
05:40And certainly, we see that in the tech sector.
05:42Well, we'll be talking about leveraged single stock ETFs in just a minute.
05:45But, Ben, before we let you go, it's exciting that it's earnings season because we're not getting official government data on where this economy is.
05:52Maybe corporate America can fill in the gap.
05:54But with the government shutdown, I'm curious about what the implications for the ETF industry are,
06:00whether or not this has any bearing on the record pace of ETF launches that we've seen so far year to date.
06:07There doesn't seem to be much of anything that's slowing down ETF these days.
06:10But maybe the government shutdown could play a little bit of a role.
06:15It's just effectively going to queue some of these new product launches that need SEC or government approval to be able to get to market.
06:23And when you see that, you know, again, if they're not going away, they're just sort of queuing quietly in the background.
06:29So we anticipate when the government reopens, certainly there will be a spike in those new product launches,
06:36especially headed into year end, where we would anticipate, again, a historically busy season to get new products to market.
06:43And, you know, here we go once again.
06:45They're stacking.
06:46They're stacking quietly behind but ready to go.
Be the first to comment