On the most recent episode of ETF Prime, VettaFi’s Todd Rosenbluth, head of research, discussed the three big research trends happening currently on the VettaFi platform. Tuttle Capital’s and CIO, Matt Tuttle, shed light on the firm’s two Cramer ETFs, and Matt Hougan, CIO at Bitwise, closed out talking bitcoin placement in portfolios and their newest ETF launched.
Mid-Month March ETF Research Trends
VettaFi offers advisors and investors a number of ways to access ETF-related news, analysis, and data across its platforms. By analyzing proprietary data, Lara Crigger, Editor-in-Chief, has been teasing out research trends happening on the site as markets reacted to news of bank failures this month.
Rosenbluth reported that there was a massive engagement spike in research on regional banks mid-month, particularly in the SPDR S&P Regional Banking ETF (KRE ) and the iShares U.S. Regional Banks ETF (IAT ), a fact that is unsurprising given that most advisors and investors are either researching an ETF they currently own or possibly looking for buying opportunities.
“We saw more than a tripling in the traffic — this is mid-month of March versus mid-month of February,” Rosenbluth explained. What was of even greater surprise to Rosenbluth was the enormous rise in interest for the Direxion Daily Regional Banks Bull 3X Shares (DPST ) which fell sharply as regional banks stocks dropped due to its leverage.
It’s been a week of “really strong engagement in regional banking ETFs and financial ETFs in general as we saw a swing towards that sector versus the broader, other sector universe,” Rosenbluth said.
The Siren Call of Short-Term Treasuries and Bond Performance
Another trend that has arisen in the midst of the banking crisis and fears of contagion is research on short-term Treasuries which can be appealing for the risk-free income opportunities they can provide for portfolios. Funds like the SPDR Bloomberg 1-3 Month T-Bill ETF (BIL ) experienced a five-fold engagement increase year-over-year on the VettaFi platform while the SPDR Bloomberg 3-12 Month T-Bill ETF (BILS ) has doubled in engagement.
“We saw engagement, we saw interest, and then we’ve seen flows: BILS has pulled in nearly $400 million since the beginning of March. It isn’t just that people are tracking and looking at this ETF on our platform — they’re also putting money to work after they do that,” Rosenbluth said.
The discussion turned to talk about bonds and the diversification that they are once more providing for portfolios after a year of correlation to equities in 2022. “After years of a low-rate environment, advisors are interested in learning about the income component to a bond’s total return, they’re not just looking at price return,” explained Rosenbluth. “They’re wanting to get more insight into terms like duration and maturity that they’ve never needed to pay attention to in the last five-10 years.”
Rosenbluth offered up an analysis on why the 60/40 is far from dead. A 60/40 portfolio with exposure to the iShares Core U.S. Aggregate Bond ETF (AGG ) alongside the Vanguard Total International Bond ETF (BNDX ) would be outperforming an 80/20 portfolio of primarily equities YTD.
“Because the Fed has raised rates, and likely will do so on more time this week, duration matters and I think advisors and investors are benefiting from a healthy slice to their fixed income portfolio.”
The Difference in AI ETFs is How They’re Built
Artificial intelligence was trending strongly ahead of the banking crisis but Rosenbluth was quick to caution that all AI ETFs are not the same. One class of ETFs such as the First Trust Nasdaq Artificial Intelligence and Robotics ETF (ROBT ) invests in companies that work within AI development compared to ETFs that utilize AI to pick the stocks they hold, such as the AI Powered Equity ETF (AIEQ ).
The Cramer Conundrum
Matt Tuttle, CEO and CIo of Tuttle Capital, was up next to discuss why Tuttle launched the Long Cramer Tracker ETF (LJIM ) and the Inverse Cramer Tracker ETF (SJIM ) based on Jim Cramer’s market predictions.
“I’ve always known that the consensus is wrong when it comes to the market,” Tuttle said. “Jim Cramer is the consensus on steroids; not only is he out there swinging at every single pitch… he also has an amazing what I call a reverse Midas touch where he’s just got the ability to make these calls that are just so epically wrong.”
In order to make stock designations for the funds, multiple people watch Cramer on CNBC during his shows and appearances as well as watching his Twitter for specific buy and sell signals that he gives both on air or on Twitter.
LJIM buys and sells stocks based on Cramer’s recommendations while SJIM invests in the opposite of what Cramer recommends and Tuttle removes old holdings as new ones come in based on Cramer’s recommendations, with the exception of legacy recommendations like NVIDIA and Meta. Tuttle explained that they try to keep the funds to about 50 holdings apiece.
Investing in Bitcoin Futures Long-term With Bitwise
Bitwise launched the Bitwise Bitcoin Strategy Optimum Roll ETF ((BITC )) today and Matt Hougan, CIO at Bitwise, was on to talk about the fund and where bitcoin can fit into portfolios. The fund invests in bitcoin futures but instead of investing in just the front-month futures like other bitcoin futures ETFs, as futures expire, Bitwise looks for the futures contracts with the best long-term return potential and backwardation and also the least contango. It’s a strategy that should benefit long-term investors in the space as opposed to a more short-term fund approaches.
“Historically, those ones that take an optimized approach have outperformed the front-month approach over time because they’re making more intelligent decisions,” Hougan explained. “We took that piece of ETF history and applied it to the bitcoin space.”
Bitwise currently doesn’t believe a spot bitcoin ETF will be approved in the U.S. this year so this is an alternative for investors seeking exposure to the space in the interim, or on a longer-term basis that can give some of the added benefits that futures can carry in a rising rate environment. An added benefit of a fund like BITC is that it can bring investors into the advisory bubble whereas before they likely were investing in bitcoin independently.
Bitcoin can offer strong risk-adjusted returns for portfolios at a 1-5% allocation but the caveat is that it must be rebalanced regularly according to Hougan. “I like to tell people it’s like cayenne pepper: a little bit in your food is fantastic, too much and you won’t be able to breathe but a little bit really does go a long way here.”