READ: Rosenbluth and Fee on the Secret Income Story

Jon Fee: Todd Rosenbluth, head of research at VettaFi. How are you?

Todd Rosenbluth: It’s great to be with you, Jon. Thanks. How are you?

Jon Fee:  I’m good. I’ve got questions and I hear you’ve got answers. I’m going to start off with what was interesting in ETF flows last month. I know the headlines were all about crypto, but where was the money going?

Todd Rosenbluth: Yeah, the headlines were about crypto. We also saw really strong inflows into equity ETFs and some of the heavyweights tied to the S&P 500 and the Nasdaq-100. But I’m going to be boring and tell you what was most exciting to me: 90% of the fixed income flows went into government bond ETFs, ultra-short, hide-under-the mattress ETFs like SHV and BIL. Those are from iShares and State Street, respectively. Investors hunkered down. They wanted to write out whatever volatility was happening in the marketplace, and they turned to government bond ETFs.

Jon Fee: Once again, Todd, sometimes headlines do not dictate bottom lines, especially in portfolios. Another question that I have for you: What is one ETF that launched, say in the last month, that has you excited? And tell me why it’s got you excited.

Todd Rosenbluth: So a common theme we’re going to have on this will be about fixed income ETFs, which are really having strong demand. I’m excited that Capital Group expanded its lineup of actively managed ETFs. Five new products came to market in September. One of them is a core bond fund, the Capital Group Core Bond ETF (CGCB B). Now, core bond funds, we have enough of those, Jon, yes. But this is Capital Group behind American Funds, behind the Bond Fund of America. This is a different style of ETF. This is an ETF, not a mutual fund. It’s run independent of the Bond Fund of America. But boy, Capital Group has that active management expertise. I’m so excited that they continue to build out their lineup.

Jon Fee: And they certainly have a lot of momentum to that lineup. Todd, you have a good sense of the financial advisor sentiment. Last I counted, you did over 100 webcasts with FAs this year. I bet that’s probably reaching 25,000 to 30,000 financial advisors. So when you think about all that connectivity that you have with the financial advisor audience, what’s a compelling trend that you’re noticing? What’s the FA sentiment right now?

Todd Rosenbluth: What’s interesting is, again, sticking with that fixed income theme, is that we always hear about, and I was talking about it, of active management versus index or passive management within the ETF structure, as well as the mutual fund structure. We’re seeing it’s active and passive. So we’ve recently held a survey during a webcast that I got to moderate, and we asked, how are advisors getting core bond fund exposure. Almost 60% chose active and passive strategies. This is what they want. They’re blending Barclays Ag or Bloomberg Barclays Ag strategies with active management, or they’re combining an index-based approach using a different index and adding on active management. There’s room for both active and index-based products, and I’m so excited that advisors are communicating that to us at VettaFi, which we’re communicating as well to the asset managers.

Jon Fee: Very cool. It certainly speaks to the runway that’s out there in the fixed income ETF space.

Todd Rosenbluth: Jon, I think what it also speaks to is this is what we’re trying to respond to. We at VettaFi, as you know, have an Income Strategy symposium taking place on October 27. We are going to have active managers. And we’re going to talk about some index ETFs. We’ll also bring all of those thought leaders together to help communicate with advisors how they position towards the end of the fourth quarter, as well as into 2024. So I’m excited that I’m also moderating that. I guess you can add that to my tally. Tom Lydon and I are co-moderating that event.

Jon Fee: Can’t stop, won’t stop. All right, Todd, one more question for you. What’s ahead for November?

Todd Rosenbluth: Well, my eyes are on whether or not we get a spot bitcoin ETF, or we see it closer towards having one perhaps into 2024. We’re going to get more tea leaves coming out from the SEC in the coming weeks. In fact, by the time people listen to this, we might know more information, but it’s something I’m certainly mindful of. Now, you touched on earlier that we have futures-based ETFs. We’ve seen new products come to market. It’s still a very small part of the ETF pie, so I’m also excited to see if we see a buildup in the equity ETF space. November and December tend to be pretty heavy months, typically for equity flows. I wonder if we’re going to see that again, given the expected equity market volatility.

Jon Fee: I guess time will tell. Todd, thank you for the time. You’re one of our VettaFi voices. You got your finger on the pulse of not only what ETFs are happening right now, but also what’s coming next, but most importantly, what’s top of mind for the financial advisor. So thank you, Todd, for being one of our VettaFi voices, and always keeping your finger on the pulse. I’m going to throw out a fun question for you. As a VettaFi voice, if all of you — you, Dave Nadig, Tom Lydon, Lara — if you guys started a cover band, would you call it VV Top?

Todd Rosenbluth: Well, some of us don’t have the hair to be able to be a part of something like that. So I guess, if it’s going to be a knockoff and you can have people who look like me, I’ve got a guitar behind me. I don’t know how to play it. I hope somebody wants to take the time to teach me. But yeah, I’ll be doing the Milli Vanilli version of playing in that band.

Jon Fee: Sounds good. All right, Todd, until next time, I’ll see you around the office. Thank you.

Todd Rosenbluth: Thanks, Jon.

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