On this episode of ETF Prime, host Nate Geraci speaks with a trio of individuals discussing several different ETF-related topics. His guests include VettaFi’s Stacey Morris who gives insight on the recent performance of the energy sector, and what she expects from it for the rest of 2023. Geraci also speaks with BlackRock’s Aguirre who talks about her firm’s philosophy behind their recent ETF launches, and the growing interest in actively managed and options-based ETFs. To close the podcast Geraci speaks with Parabla’s Hanks who discusses his firm’s LZRD ETF.
Recent Performance of the Energy Sector
To open the podcast Geraci speaks with VettaFi’s Stacey Morris. Geraci discusses that since the last time he spoke with Morris, the energy sector has had a positive performance. Geraci highlights the Energy Select Sector SPDR Fund (XLE ) as an ETF that has seen some of this growth in recent months. Morris mentions that at the time the pair spoke last, it was the lowest the XLE fund had been all this year, and now earlier this month it reached its highest point. She mentions how in the last three months the sector as a whole has seen pretty big shifts in its performance.
“The biggest change has really been oil prices,” said Morris.
Morris discusses that most of the improvement from oil could be seen in July and now in early August. She also mentions that U.S. oil prices were nearly up 16% in July. Ultimately Morris says that the growth that the oil industry has recently seen has helped energy stocks rebound this year.
Another Energy Sector ETF to Consider
Geraci then highlights that when looking at the energy sector individuals typically only mention the XLE fund, because of the substantial size of the fund. However, Geraci mentions the Vanguard Energy ETF (VDE ) as another popular ETF that investors typically consider in this sector. He then asks Morris about how the funds compare to one another. Morris says that when comparing the two funds using VettaFi’s LOGICLY platform investors can see that these two funds are similar when looking at several of their key characteristics. Yet, there are several different distinctions between the two funds that can contribute to VDE’s slightly better performance YTD. Morris mentions one of the differences between the two funds is that VDE has a lower weight of Chevron (CVX) than XLE.
“When you look at that outperformance relative to XLE I think that lower weighting of Chevron is actually helping with that,” said Morris.
Another difference that Morris highlights between the two funds is VDE’s heavy weighting in Cheniere (LNG). To close the segment the pair, discuss the performances of several other energy ETFs, consolidation, and factors that can affect this sector. They also discuss what Morris’s expectations are for the energy sector to close out the year.
BlackRock’s Approach to Launching ETFs
The conversation shifts when Geraci brings on Rachel Aguirre who is the head of U.S. iShares products at BlackRock. Geraci mentions that BlackRock is an industry leader with over 400 ETFs in U.S. markets. The firm also has nearly $2.4 trillion in assets under management. This year alone the firm has had 18 new notable ETF launches. Geraci then poses the question to Aguirre about what she believes separates BlackRock from other firms when looking at their approach to releasing new ETFs.
“We are absolutely committed to providing investors access to nearly every corner of the market,” said Aguirre.
Aguirre also mentions that they hope to provide investors with better outcomes when building their own investment portfolios. Aguirre says that when it comes to bringing new products to market the firm focuses on three key principles. Two of the principles that they focus on are having a key investment thesis within the fund, and fulfilling a need for the market. The third principle is if the fund’s strategy is suitable for an ETF. Ultimately the firm wants to ensure that its products can work in all market environments.
In addition, Geraci and Aguirre discuss the growth that actively managed, options-based, and buffer ETF strategies have seen recently. Furthermore, the pair go into how BlackRock is implementing these strategies into some of their recent ETF launches.
To close out the podcast Geraci speaks with Phil Hanks who is the founder and CEO of Parabla who launched the Parabla Innovation ETF (LZRD ) in April of this year. Hanks mentions that he has loved following markets since he was a teenager and has previously worked as an advisor. Hanks also has always had the dream to run and launch his own fund so in early 2022 he decided to pursue that dream. The pair also discuss the origin story of both the firm’s name “Parabla,” and the ticker symbol LZRD. Geraci then asks Hanks about what is “under the hood” of his fund.
“Underneath the hood of our ETF, you will see a lot of growth names, and there is a considerable amount of large-cap in there,” said Hanks. To finish the segment Hanks continues diving deep into his actively managed fund’s holdings.
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