Active, Crypto & Core ETFs, Oh My

Many of the largest ETFs have swelled in size this year as more advisors and investors embrace ETFs. The Vanguard S&P 500 ETF (VOO A) led the pack with $61 billion of new money. This is already a new industry calendar year record if it holds. However, U.S. core equity peers like the iShares Core S&P 500 ETF (IVV A), the SPDR Portfolio S&P 500 ETF (SPLG A-), and the Vanguard Total Stock Market ETF (VTI A) are also having a strong year. 

Meanwhile, low-cost, broad market fixed income ETFs like the iShares Core U.S. Aggregate Bond ETF (AGG A-) and the Vanguard Total Bond Market ETF (BND A-) added $14 billion and $8.7 billion, respectively. These and other fixed income ETFs have become key building blocks for portfolios. Low-cost index funds are also a gateway for ETF usage to support other investment styles.

Bitcoin ETFs successfully launched in January and were more popular than I expected. Eight months later, it is clear this market segment remains one to watch. The iShares Bitcoin Trust (IBIT ) was the leader, with $21 billion of net inflows, including $910 million in August. Peers like the Fidelity Wise Origin Bitcoin Fund (FBTC ), the ARK 21 Shares Bitcoin ETF (ARKB ) and the Bitwise Bitcoin ETF (BITB ) also gathered $2 billion or more in assets.

Though the more recently launched ethereum ETFs did not experience the same level of initial demand, some investors have embraced them. Indeed, the iShares Ethereum Trust ETF (ETHA ) pulled in $1 billion since its late June launch. VettaFi believes, as education within the ETF-focused advisor community about cryptocurrency occurs, the asset bases for bitcoin and ethereum ETFs will likely climb.

The $1 billion net inflows club is littered with actively managed ETFs. The BlackRock U.S. Equity Factor Rotation ETF (DYNF A-), the JPMorgan NASDAQ Equity Premium Income ETF (JEPQ A+), and the Janus Henderson AAA CLO ETF (JAAA ) top the list. However, the Avantis U.S. Small Cap Value (AVUV ), BlackRock Flexible Income ETF (BINC A-), Capital Group Dividend Value ETF (CGDV A) are also having a great year. Active ETFs have gathered approximately 30% share of the industry’s flows.

Michael Gates, lead portfolio manager of BlackRock’s Target Allocation ETF model portfolio suite, recently shared with VettaFi the rationale of the team’s growing use of active ETFs like BINC and DYNF. “Accessing alpha-seeking strategies through an active ETF provides the potential for more dynamic alpha-seeking while retaining the tax efficiency, liquidity, and transparency benefits of the ETF wrapper. These management teams have deep expertise in markets or investment styles that we cannot access via index ETFs,” he noted.

We believe that model managers and advisors will continue to turn to active ETFs in the remainder of 2024 and in the years to come. Indeed, we will have a session on active ETFs during this week’s Q4 Equity Symposium. Register to join us.

As an asset category, fixed income ETFs pulled in $191 billion in the first eight months. The 2021 calendar year record of $212 billion could be passed by month end. In addition to AGG, BINC, BND, and JAAA, other fixed income ETFs incurred demand. For example, the iShares 20+ Year Treasury ETF (TLT B-) and the iShares 0-3 Month Treasury Bond ETF (SGOV A+) gathered $11 billion and $7.5 billion, respectively, as investors sought to tactically adjust ahead of expected shifts in monetary policy.

The U.S. ETF industry gathered more than $600 billion of net inflows year to date through August. Last month, $73 billion came in despite the summer. With a typically strong fourth quarter ahead, a new calendar year record could be set and surpass the $909 billion in 2021. Oh my indeed.

For more news, information, and analysis, visit VettaFi | ETFDB.