On this week’s episode of “ETF Prime,” host Nate Geraci was joined by Todd Rosenbluth, head of research at VettaFi. Together, Rosenbluth and Geraci discussed ETF flows and how the recent 2024 election can impact ETF investing. Afterward, Rich Lee, head of program training at Baird, joined Geraci to talk about the future of crypto investing.
Future of Fund Flows
To get the ball rolling, Geraci and Rosenbluth discussed the triumphant fund flows that ETFs have seen this year. In particular, Geraci asked Rosenbluth if he believes ETF flows will surpass $1 trillion in 2024.
Rosenbluth expressed optimism that the $1 trillion benchmark could be doable. He noted that there was a good chance that 2024 ETF flows reach $900 billion this week, leaving the threshold within striking distance.
However, Rosenbluth conceded that even though “it certainly feels like” flows could hit $1 trillion this year, it’s always difficult to predict ETF momentum. He jokingly noted how both he and Geraci expected 2022 ETF flows to hit $1 trillion at the time.
Post-Election Changes
Moving on to current events, Geraci moved on to last week’s U.S. elections. He asked Rosenbluth what ETF areas could be impacted by the results of the election.
Rosenbluth noted that there will likely be a change of leadership at the SEC. Gary Gensler’s term will likely come to an end, as well as Democratic control of the SEC.
As such, Rosenbluth expected that “new priorities are going to come into focus.” In particular, he noted that new opportunities may be opening up for new crypto products. More crypto products may be able to come to market, and new pathways might be opened up to allow different opportunities.
Additionally, Rosenbluth pointed out that the potential allowance of ETF share classes of mutual funds could finally get out the door under new leadership. While change could be on the horizon, he noted it may take some time for new leadership to step into high gear.
Where ESG Stands
Geraci then pivoted to ESG, noting that the investment term has progressively moved to the back burner this year. He asked Rosenbluth if he believed a Republican administration could further marginalize investor interest in these products.
Rosenbluth noted that investors will start seeing the term “ESG” dropped from the names of ETFs, but warned that is not due to political pushback. Instead, many issuers are dropping the term due to the enactment of ETF naming rules.
From a market perspective, Rosenbluth added that many green-aligned ETFs did well during the previous Trump administration. Additionally, he noted that VettaFi’s Climate Insights Channel is continuing to see strong visitor traffic, highlighting continuing investor interest. That said, Rosenbluth does not expect these products to see the same inflows that they were seeing in the past.
“We’re not seeing the same inflows from institutions that we saw a few years ago,” he added. “There’s still money in these products. They still serve a purpose the same way that many other ETFs serve a purpose. I don’t think we’re going to see strong inflows, but I’m happy to be wrong.”
Areas of Focus
On the topic of investment categories, Geraci asked Rosenbluth if there were any in particular that he was keeping an eye on. First, Rosenbluth noted that bitcoin and crypto equity ETFs have “climbed sharply higher.”
Additionally, he noted that the financials and banking space is seeing a lot of interest. In particular, he noted how the SPDR S&P Regional Banking ETF (KRE )) saw tremendous flows in the initial days following the election.
Rosenbluth also pointed out that small-caps could see a resurgence in the days to come. If the country sees a reduction in taxes and a focus on domestic equity and production, small-caps could be a direct beneficiary.
Lastly, Rosenbluth is continuing to monitor fixed income ETFs. Not only did the Federal Reserve cut interest rates again, but any potential inflation risks from new federal policy could affect where fixed income interest stands.
“We already have a record year for fixed income ETFs,” he added. “We blew away the record of ’20 and ’21, and that certainly sets the stage for another great year.”
What Crypto Lobbying May Bring
To close out this week’s episode of ETF Prime, Geraci spoke to Rich Lee, head of program training at Baird. Geraci asked Lee about his takeaways for investment avenues following the election.
Much like Rosenbluth, Lee noted that crypto products remain an asset worth keeping an eye on. He highlighted the millions of dollars spent from crypto lobbyists on both sides of the aisle. Given the price action bitcoin has seen in the last few days, Lee noted that investors will be able to see what results this lobbying may bring.
“We started to see the floodgates open with the launch of the first set of crypto ETFs, and I think we’re only going to be poised to see more of that,” noted Lee. “It’s probably all but pretty certain that we’ll see some regulatory changes that will be more receptive to that going forward.”
Listen to the entire episode of ETF Prime, featuring Todd Rosenbluth & Rich Lee:
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