Investors are flocking to artificial intelligence (AI) ETFs, as well as short-duration Treasuries ETFs and zero-fee core equity exposure, reveals recent advisor research data.
The most recent Rising ETF Stars list, which summarizes the ETFs that saw the most significant month-over-month increases in advisor engagement on the VettaFi platform, is peppered with funds targeting artificial intelligence (AI) stocks, including those inside the (ROBT ) or (ARKW ).
The latest Rising ETF Stars list is below:
|VettaFi's Top 10 Rising StarsFebruary 2023|
|Ticker Name||AUM ($MM)||Feb 2023 Fund Flows ($MM)||MoM Engagement||YoY Engagement|
|First Trust Nasdaq Artificial Intelligence & Robotics ETF (ROBT)||$212||$17||124%||114%|
|BNY Mellon US Large Cap Core Equity ETF (BKLC)||$1,655||$1,177||108%||19%|
|SPDR Bloomberg 3-12 Month T-Bill ETF (BILS)||$1,029||$214||96%||174%|
|SPDR Portfolio TIPS ETF (SPIP)||$2,063||($58)||90%||-37%|
|AI Powered Equity ETF (AIEQ)||$119||$23||84%||173%|
|Virtus Terranova U.S. Quality Momentum ETF (JOET)||$111||$1||82%||63%|
|Roundhill Sports Betting & iGaming ETF (BETZ)||$131||$0||70%||-36%|
|United States Natural Gas Fund LP (UNG)||$1,245||$463||66%||-1%|
|ARK Next Generation Internet ETF (ARKW)||$1,214||($31)||65%||-41%|
|Global X Artificial Intelligence & Technology ETF (AIQ)||$119||$3||64%||50%|
Advisor engagement is a proprietary metric designed by VettaFi to capture research trends in the short- and long-term.
The Rising ETF Stars list is calculated by whittling down the universe of U.S.-listed ETFs to the 10 ETFs with the highest month-over-month statistically significant engagement increases. Eligible ETFs must have $100 million in assets under management and at least 12 months of track record, since that’s often the threshold that unlocks an ETF’s ability to appear on most advisory platforms.
Artificial Intelligence ETFs Soar In Popularity
Buoyed by headlines about ChatGPT and Bard.AI, artificial intelligence ETFs have seen significant engagement year-to-date on ETF Database, even if flows into these funds remain modest (about $150 million year-to-date).
Three of the ten ETFs with the highest rise in advisor engagement in February were AI ETFs, including the (AIQ ), which saw a 64% month-over-month increase in engagement; the (AIEQ ), which rose 84%; and the (ROBT ), which rose 124%.
Even the (ARKW ), which saw a 65% month-over-month engagement rise, could qualify by some measures as an artificial intelligence ETF. The ETF has some exposure to AI companies, including (CRWD) and (PATH), although AI comprises only a fraction of the disruptive technology fund’s portfolio.
Investors should note that artificial intelligence ETFs like AIQ, ROBT, and AIEQ aren’t interchangeable products. Two of them track the AI industry, while another uses AI as part of its selection process. (See: Artificial Intelligence ETFs, or ETFs Powered By Artificial Intelligence? )
That is to say, AIQ and ROBT both hold stocks of companies within the AI industry. AIQ tracks companies that use artificial intelligence to parse and analyze big data sets, either for their own purposes or as a service to clients. Meanwhile, ROBT tracks AI software and hardware makers and sellers, semiconductor and machinery producers, machine learning systems engineers, and so on.
However, AIEQ uses artificial intelligence as a stock selection tool. Meaning, the portfolio itself doesn’t necessarily include artificial intelligence companies, but rather a variety of stocks that the algorithm thinks will provide capital appreciation.
In fact, the top three industries within AIEQ’s portfolio are Health Technology (17%), Energy Minerals (11%), and Finance (10%).
Advisors Seeking To Barbell Bonds
Another emerging trend this month: Advisors are studying up on entrance strategies for the credit markets.
The highest Treasury yields in over a decade – especially for short- and ultra-short-term issues – have lured investors back to government bonds, hence why the (BILS ) saw a 96% increase in advisor engagement month over month.
Unlike other short-term ETFs, which target Treasuries with 1-3 year maturities, BILS focuses on T-Bills with three to twelve month maturities. That offers the opportunity to capitalize on higher yields, while still offering much of the same lower rate risk and liquidity as cash.
Another ETF catching advisors’ attention is the (SPIP ), which has seen engagement rise 90% month-over-month.
Taken in context with BILS’s rising engagement, this could suggest advisors are researching opportunities to barbell their fixed income approach, by pairing an allocation in short-duration Treasuries with a longer-duration exposure, like SPIP. (SPIP’s duration is 5.78, compared to BILS’s duration of 0.37.)
Zero Fee ETFs Finally Gain Notice
Another ETF zooming up the Rising ETF Stars List is the zero-fee (BKLC ), which has seen a month-over-month rise in engagement of 108%.
The fund has also brought in massive amounts of new cash, attracting $1.2 billion in inflows in February alone.
Launched in April 2020, BKLC, which carries an expense ratio of 0%, was somewhat overshadowed by the market drama characterizing the early months of the COVID pandemic. The fund grew modestly over the subsequent years and started off 2023 with about $430 million in assets under management.
However, the fund took in a massive haul of new cash last month. Much of this was likely driven by “BYOA” or “bring your own assets” inflows, a term Bloomberg’s Eric Balchunas popularized to refer to when ETF issuers move in-house clients’ assets into their own ETFs.
Other ETFs filling out the Rising ETF Stars List this month include the multi-factor (JOET ), which rose 82% month-over-month; the retail darling (BETZ ), which rose 70%; and the (UNG ), which rose 66% on the back of higher natural gas prices.
Contact Lara Crigger at firstname.lastname@example.org
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