2025 Is The Year of Active ETFs: Todd Rosenbluth

Bloomberg

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00:00Let's talk about this triple crown, as Eric has been calling it.

00:04You have record launches, record flows, record trading volume.

00:07I want to start where Eric ended, that you think about the launches that we're seeing through,

00:11not just coming through in the U.S. at record levels, but also internationally.

00:15Do you agree this is as good as it gets?

00:18Well, it's great to be an ETF analyst or an ETF reporter covering this

00:22because there's always something to be able to talk about.

00:24And the ETF industry couldn't be healthier.

00:26So I'm really excited about that.

00:28I'm excited that we've got new products that are coming,

00:30some that are risk-on-related products, so single-stock leveraged or income-oriented products.

00:37But we've got some new entrants into the marketplace,

00:39active firms that are now here for the first time.

00:42Pictet, for example, is a firm that's recently entered in the ETF marketplace.

00:46I think I was on the last—

00:47That's how you say it.

00:47Yes, that's how I believe you say it.

00:49You have to go back and edit the film then.

00:51We sound like Americans a few weeks ago.

00:51You said Pictet like 20 times.

00:54Yeah.

00:54It's too late.

00:55Yeah.

00:55Anyway.

00:55Sounds better when you say it.

00:56But lots of firms that are coming in,

00:59and even the established firms are continuing to expand some of those successful lineups.

01:03So it's a great time.

01:05So what does it say about the fact that active is really booming right now,

01:08whether it's fixed income or whether it's equity,

01:10active is having its moment.

01:12And for so long, everyone thought passive was going to eat active's lunch.

01:15Well, it did.

01:16And it still is.

01:17It is still the majority of the overall assets.

01:20It is still the majority of the overall flows.

01:22But that gap is starting to narrow.

01:24Some of that has to do with the firms that have come into the marketplace and are leaning

01:29in more heavily.

01:30Some of those asset managers are leaning more heavily.

01:33We've seen BlackRock add active strategies into their model portfolios throughout the year,

01:38and that's helping to boost things.

01:40We are also seeing people just believe in active management in terms of volatility for fixed income.

01:47So we've seen that be popular.

01:48But I don't want to gloss over there are some success stories in the index-based ETF world.

01:53Victory has an ETF, VFLO, VFLO, that's gathered over $3 billion.

01:59It just launched a year ago, doubled in size.

02:02So there are success stories in the index world.

02:05It's just easier to focus on the active space.

02:07Speaking of something like that where the index is smart beta,

02:10we would call that passive, but that actually is picking stocks based on active design.

02:15Smart beta is counted in passive, and it's this, you know, once a year,

02:20all these people worry about ETFs.

02:23The latest one is that, oh, my God, they're going to ruin capitalism.

02:26Now, obviously, I don't agree.

02:28Stocks go up and down, even with all these flows.

02:30The other thing that I dig is that there's more ETFs than stocks,

02:34but there's also way more mutual funds than stocks, too.

02:37Personally, this has been coming up my whole career.

02:39I don't see any problem at this point.

02:41Maybe you do, but as an analyst,

02:43I'm sure you have to respond to these some worry articles that come up pretty regularly.

02:48I think ETFs are a way that many more people are getting exposure to the marketplace.

02:53I respectfully disagree that smart beta or factor-oriented is active.

02:58It is choosing stocks, but it is choosing stocks based on rules,

03:02and we understand when that playbook is coming out.

03:05And indices rebalance a couple of times a year, sometimes once a year.

03:09You just referenced the S&P 500 that went through a rebalance.

03:14Companies got added in, three of them in, three of them out.

03:17That's healthy.

03:18That's what an index is supposed to do, is supposed to clean things up.

03:21I think ETFs are increasingly the go-to vehicle for many more people to get exposure to the equity,

03:27the fixed income, and even the crypto marketplace, too.

03:29Let's talk about an interesting notice that we saw from the SEC.

03:33I believe it was last week.

03:35We know that over the past several months, we've seen U.S. filings for three-times leveraged products,

03:40five-times leveraged products.

03:42The SEC basically posted these letters saying that it wasn't going to continue with its reviews of these applications.

03:50So it seems like a line in the sand has been drawn when it comes to how far some of these leveraged ETFs can go in the U.S., Todd.

03:57And I wonder whether you think this is the end of it, or are we going to see some of these issuers come back and try again with regulators?

04:04Well, I would hope they would follow the rules.

04:06And if the SEC has come out and said, we're not going to review these, let's not waste the time.

04:12There's enough other great products that are coming to marketplace.

04:15We've seen a proliferation of leveraged ETFs that have come to market that are taking on additional risk.

04:20I want to just – I caught my eye, and I know you have Direxion CEO on later on in the show.

04:27But they launched a suite of products that are the top five companies within a respective industry.

04:34Semiconductors, for example.

04:35I think the ticker is TSXU is the top five there.

04:39So this might be an oxymoron, but a little bit more diversification to your leveraged ETFs.

04:46So we have the just semiconductor only.

04:49We've got the individual stocks.

04:51This is somewhere in the middle for people who want a little bit less risk on.

04:55I'm looking at Bitcoin currently unchanged at about $90,000, but a long way off from the record highs that we saw in October.

05:02Some people are worried about a crypto winter.

05:04What does that mean for ETFs tied to crypto and the various other altcoin tokens?

05:09So I'm the least qualified person to probably offer crypto advice on this table.

05:13But that was a big growth area of ETFs in the world of 2025.

05:16It is.

05:16So there was adoption.

05:18I think what we've seen is that even though crypto has pulled back and Bitcoin has pulled back, most of the money has stayed in.

05:24There have been outflows for some of the products.

05:27But what we've seen is also a next evolution of Bitcoin and crypto related ETFs.

05:32I saw Nios launched an Ethereum income ETF last week.

05:37We've had Calamos offer downside protection to cryptocurrency.

05:41So it isn't just following the price of Bitcoin and Ethereum, but either downside protection or enhanced income.

05:48Eric, what do you think?

05:50Yeah, I mean, only 4% of the people actually left.

05:54So it's pretty strong.

05:55But still, 40% is definitely a drawdown.

05:57But it was up 122% last year.

06:00That's 5x anything else.

06:02So, I mean, things can't go up that much every year.

06:05Like, everybody has to relax a little sometimes.

06:07But speaking of relaxing, I'm relaxed because I have a steak dinner come my way for zero cost.

06:14Todd's going to pay for it.

06:15Last time he was here, we bet on whether large caps or small caps would outperform through his.

06:21And you were on team large cap?

06:22I'm on team large cap.

06:24Never bet against U.S. large caps.

06:25He wanted to.

06:27And so S&P is up 6.2%.

06:29Your small caps are up 3.4%.

06:31I don't know, man.

06:32That's a lot of ground to try to gain between now and the end of the year.

06:36So when do you want my restaurant choice?

06:39So a few things.

06:40One, the last time I was here on air, you sprung this bet on me.

06:44It wasn't that I came to you.

06:45You came to me.

06:47Second thing is, as far as I know, the year hasn't ended.

06:49We still have three weeks left in the marketplace.

06:53300 basis points of the gap has been narrowed in the last month.

06:57And I want to just remind you, there was a football game that the Eagles played against

07:01the Rams earlier this year.

07:03And I believe the Eagles were down at halftime and they narrowed the gap in the third quarter.

07:08And I believe the Eagles won.

07:10That's the only victory I think you're going to have tied to this conversation.

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