On this week’s episode of “ETF Prime,” host Nate Geraci was joined by Cinthia Murphy, investment strategist at VettaFi. Together, Murphy and Geraci discussed the recently released FIRE and LifeX ETFs. Afterwards, Rachel Aguirre, managing director and head of U.S. iShares product at BlackRock, joined the podcast to break down the rise of actively managed ETFs.
Yearly Flows Pass $1 Trillion Threshold
To get started this week, Geraci highlighted how ETFs have overall crossed the $1 trillion threshold in terms of inflows this year. This haul now passes the previous annual record of around $910 billion in 2021. Turning to Murphy, he asked her to share her perspective on or reaction to the year.
“It’s been a phenomenal, phenomenal year,” Murphy noted. Looking back at when the first U.S.-listed ETF, the SPDR S&P 500 ETF Trust (SPY ) came to market in 1993, Murphy pointed out that it took about 17 years for ETFs to hit $1 trillion in assets overall.
Nowadays, it took less than a year for the ETF market to add another $1 trillion in flows. “These numbers are an incredible testament to the exponential growth potential of ETFs,” assessed Murphy.
Focused on FIRE Funds
Looking at new ETF ideas that are coming to market, Geraci pointed out the FIRE ETFs in particular. He explained to the audience that FIRE stands for “Financial Independence, Retire Early.” Before diving into the funds, Geraci asked Murphy what she thought about the movement overall.
Murphy noted that the FIRE strategy could point to a cultural or demographic shift about how people view wealth. She added that many FIRE investors are attempting to save upwards of 75% of their earnings each year. While she admitted that “there’s no way” she is saving three quarters of her income every year, Murphy did concede that the movement is interesting.
Looking at individual funds, Geraci highlighted the FIRE Funds Income Target ETF (FIRI ) and the FIRE Funds Wealth Builder ETF (FIRS ). He then asked Murphy why she views these funds as particularly innovative.
Murphy asserted that FIRI and FIRS are essentially model investment strategies that cater to a specific group, that group being FIRE investors. Currently, most model ETFs are more traditional strategies, such as iShares funds.
“It puts a multi-manager, multi-brand model portfolio in a ticker in the hands of a crowd that doesn’t tend to get a lot of attention from the financial industry. I think that’s pretty innovative,” concluded Murphy.
LifeX's Flexible Ladders
Moving on, Geraci then highlighted the LifeX ETFs. These funds include the Stone Ridge 2050 Longevity Income ETF (LFAI ) and the Stone Ridge 2048 Longevity Income ETF (LFAE ). He then asked Murphy to break down what these funds do and why she considers them innovative products.
Murphy explained that the LifeX funds offer customized bond ladder strategies across different time horizons. She added that investors can use these funds to customize their distributions, as well. Much like the FIRE funds, Murphy asserted that the LifeX funds offer empowered strategies to help investors build towards retirement.
By giving investors more control to lock in rates and control their time horizons, the LifeX funds offer an easier means to set up savings for retirement. “There are structures and ways to do that, but these simplify that whole effort so much with the ETF structure,” Murphy added.
BlackRock's First Mutual Fund Conversion
To close out this week’s podcast, Geraci was then joined by Rachel Aguirre, BlackRock’s managing director and head of U.S. iShares product. Geraci noted that active ETFs have seen great momentum in 2024.
Looking at BlackRock’s fund arsenal, Geraci pointed out the BlackRock International Dividend ETF (BIDD ) was converted from a mutual fund to an ETF back in November. The launch of BIDD as an ETF marks BlackRock’s first ever active mutual fund to ETF conversion. Geraci then turned to Aguirre and asked her what influenced BlackRock’s decision to convert BIDD into an ETF.
“It does represent our first mutual fund to ETF conversion, and it really reflects what has been an increasing, growing preference from investors for the ETF wrapper,” Aguirre noted. In particular, she noted that BlackRock’s investors are looking for the tax/cost efficiency, liquidity, and transparency within the ETF wrapper.
Additionally, she assessed that there have been significant outflows from active mutual funds, while active ETFs are seeing inflows. Aguirre added that the decision to convert BIDD into an ETF was done so due to it being in the best interest of the shareholders.
Listen to the entire episode of ETF Prime, featuring Cinthia Murphy and Rachel Aguirre
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