This week’s edition of the ETF Prime podcast saw host Nate Geraci invite VettaFi Investment Strategist Cinthia Murphy to tour the key trends in new ETFs right now. Later, Tradr ETFs Head of Product and Capital Markets Matt Markovich joined the show to discuss his firm’s calendar reset leveraged ETFs.
Geraci and Murphy touched on trends in new launches overall and key themes, like leveraged and buffered ETFs. For Murphy, perusing the list of the top 30 ETFs launched this year by inflows, the story has not focused as much on strategic innovation as cost innovation. Investors want the strategies, she noted, with the top 30 identified by Geraci taking in $55 billion in assets this year.
Specifically, Murphy pointed to a trio of standout ETFs among new launches that have innovated on cost. The three have gathered at least $1 billion in their launch year. That includes the PGIM Ultra Short Municipal Bond ETF (PUSH ), charging 15 basis points (bps). She underscored the Global X Russell 2000 ETF (RSSL ) as another ETF pushing costs down at 8 bps.
“Global X’s RSSL, again, small-cap stocks for eight basis points, that even under undercuts Vanguard,” she said.
Even the Eaton Vance Floating Rate ETF (EVLN ), Murphy said, stands out for cost innovation, charging 60 bps for an active fixed income approach.
ETF Trends Lead on ETF Prime
Geraci highlighted the Roundhill Innovation-100 0DTE Covered Call Strategy ETF (QDTE ), which launched in March, as well. Charging 95 bps, the fund looks to generate income via selling zero days till expiration calls. Geraci highlighted the strategy for gathering $500 million in AUM since launch.
“That stood out to me, maybe not so much for the innovation, even though innovation is in the ETF’s name. I just couldn’t believe that the demand already looked like that,” Geraci said.
Murphy agreed, sharing that VettaFi has also seen that growing demand for options-based strategies.
“That one is innovative in the sense of the 0DTE [date to expiration], but it’s kind of like we discovered the options space, and we put that [strategy] wrapped beautifully in an ETF wrapper, and all of a sudden we went obsessed,” Murphy said.
Turning to crypto, Geraci asked Murphy for her thoughts on crypto ETFs constituting more than half of his top 30 new launches. To Murphy, the intriguing trend has come from advisor activity regarding crypto.
“On webcasts and surveys we’ve been doing at VettaFi, it’s been kind of fascinating to see advisors say that about half of their clients are already in crypto, or they’re investing in this on behalf of clients, but they themselves don’t feel very prepared to talk about this category,” Murphy said.
The Magnificent Seven
Looking at themes overall, some key trends emerged, per Murphy. Magnificent Seven-focused ETFs, as well as leveraged and buffer ETFs, have stood out this year, she said. Murphy explained that, though popular now, Magnificent Seven-focused ETFs fit into a thematic ETF mold. The case for a longer-term view, rather than placing those funds into a “faddish” category, involves the role of artificial intelligence.
“If you could argue there’s a difference between other thematics and this specifically is that a lot of it has been tied to Nvidia (NVDA), and Nvidia has been tied to the artificial intelligence boom,” she said. “If you believe that is a long-term thing, something that’s not going to go away next year, then these could have some legs.”
Leveraged and buffer ETFs also took in significant flows, Murphy shared. Leveraged ETFs outpaced commodities ETFs in Q3, and pulled in half the flows of international equity ETFs.
“We talk all the time about compounding and risk, and holding for a day, all the beware signs we put around this category, and it is still just taking in a ton of money,” she said.
Murphy made a similar point about buffer ETFs and education, with those strategies picking up significant flows. She emphasized investor concerns about Magnificent Seven-related risks as driving interest in buffer ETFs.
“I think on defined outcomes ETFs alone, assets have grown something like tenfold in four years,” she said. “It’s a super, super hot category, and it just keeps growing.”
Muni Bonds, Buffer ETFs, and More
The pair also discussed what Geraci described as a category that “puts him to sleep,” muni bonds. There, too, Murphy said, as noticed in the recent VettaFi Fixed Income Symposium, munis have drawn new interest. With bonds “acting like bonds” again, she said, and custom baskets helping navigate tricky markets, product development in the space is rising.
Geraci’s second segment saw the host interview Tradr ETFs head of product and capital markets, Matt Markovich. Tradr ETFs specializes in so-called “calendar reset leveraged ETFs.” It focuses on solving the “volatility decay” issue facing traditional daily reset leveraged ETFs.
“Unlike the daily leveraged ETFs, our calendar reset ETFs will magnify the performance that you’re gonna get, as stated in the sort of the fund strategy and fund name, but it’s going to do so over a specified period of time," Markovich said. “And that, again, as you noted, is a calendar period of time.”
Listen to the entire episode of ETF Prime, featuring Cinthia Murphy and James St. Aubin:
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