On this week’s episode of ETF Prime, host Nate Geraci sat down with VettaFi head of research Todd Rosenbluth to discuss key takeaways from State Street’s 2024 ETF Impact Survey. Later, Geraci welcomed Grayscale’s John Hoffman to discuss the debut of spot ether ETFs. Finally, Macquarie’s Brad Klapmeyer spotlights the firm’s Focused Large Growth ETF (LRGG ).
ETF Impact Survey & the Need for More ETF Education
State Street’s 2024 ETF Impact Survey includes data from 300 individual investors, 200 financial advisors, and 100 institutional investors.
The survey found that 45% of individual investors have ETFs on their portfolios, 70% of financial advisors recommend ETFs to clients, and 67% of institutional investors use ETFs in their investment strategies.
“On the individual investor side, there’s just so much room for growth,” Rosenbluth said. “More than half of investors are not using ETFs, even though over 90% of those individuals that are aware of ETFs.”
“The more that they learn about the benefits of ETFs, the greater the likelihood they will start adopting ETFs into their portfolios,” Rosenbluth added.
This means the runway for ETFs is quite strong. There is tremendous room for growth in ETFs. However, better ETF education is necessary.
Notably, more than half of individual investor respondents said they have a difficult time understanding the difference between mutual funds and ETFs.
The asset managers that have been talking about mutual funds for decades are uniquely positioned to help investors better understand ETFs, according to Rosenbluth. Firms such as Capital Group, T. Rowe Price, Fidelity, Morgan Stanley, among others, offer both mutual funds and ETFs.
“It’s not that people have had a bad experience with ETFs, or that they think they’re too risky. It’s just they don’t understand the basics,” Rosenbluth said.
Another key takeaway from the survey is the importance of diversification.
A large number of institutional investors are using ETFs in their investment strategies. While Rosenbluth expected liquidity to be the primary reason why institutions use ETFs, the survey found diversification to be the top focus.
Spot Ether ETFs Pass 1 Week of Trading
Nine new spot ether ETFs launched last Tuesday, with Grayscale entering the arena with two funds: the Grayscale Ethereum Trust (ETHE) and the Grayscale Ethereum Mini Trust (ETH).
See more: VIDEO: ETF of the Week: Grayscale Ethereum Mini Trust
Grayscale’s John Hoffman said this has been an extraordinarily successful launch by all metrics.
“Whether you’re looking at volumes, market efficiency as measured by spreads, asset growth. All of the different metrics that you would look for in kind of the health check of a successful launch, this has been a really, really successful launch right out of the gates,” Hoffman said.
The successful launch isn’t surprising, according to Hoffman, as crypto is a $2.5 trillion industry today. Of course, partnering the disruptive innovation that crypto represents with the technology of ETFs is met with overwhelming demand, he added.
“What we’ve done in a lot of ways is further connect the plumbing to the traditional pools of capital,” Hoffman said. “What we’ve done it take a big step forward of connecting that capital to this technology, and making it simpler, easier, more convenient to access in a safer future-forward structure.”
Using Quality to Drive Growth
The Macquarie Focused Large Growth ETF (LRGG ) has several unique attributes, according to Brad Klapmeyer, who has full ownership of large cap growth investing at Macquarie Asset Management.
First, the fund focuses on quality. “We think quality characteristics are proving to be more persistent than growth, and quality has the ability to generate more frequent excess returns,” Klapmeyer said. “For us, quality is a non-negotiable, if you will.”
Second, LRDG is unique in its definition of quality. The investment team focuses on business model quality, not on growth rates. According to Klapmeye, only the best companies with the deepest, widest competitive moats out there will be in consideration.
“We analyze quality from a unique perspective, we look at it through both a qualitative and quantitative lens,” he added.
Third, the fund deliberately leans into concentration. LRDG comprises between 15 to 25 stocks at any given time, with the fund currently holding 22 securities.
“We wholeheartedly believe in deep concentration,” Klapmeyer said. “We believe that you can run a very risk aware portfolio that provides those exposures to those names.”
Listen to the full Episode of ETF Prime:
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