On the latest ETF Edge, Tom Lydon, CEO of ETF Trends, joined Don Draper, CEO at S&P Dow Jones Indices and CNBC’s Bob Pisani to discuss the growth and future of indexing, as well as the recent acquisition of ETF Trends by global indexing firm Alerian, crypto indexing and investing in China amidst regulatory crackdowns.
Draper discussed this year being “absolutely a record year in ETF inflows globally and in the U.S.,” and that they estimate that investors are currently saving $357 billion in management fees by choosing passive over active management for their portfolios.
When looking at indexing from the perspective of the SEC, Lydon believes the SEC Chair, Gary Gensler, to be an ally to the idea of modernization and innovation. “I think he wants to compromise. I think he likes innovation as well and with continued innovation in areas like thematics, we need innovation in fixed income, there’s nothing but upside from here,” Lydon said.
One particular area of innovation that has seen tremendous growth recently is environmental, social, and governance (ESG) investing. “We’re treating ESG as one of our biggest growth opportunities,” Draper said, where climate tends to be the largest focus by investors.
ETF Trends Acquisition
With the recent acquisition of ETF Trends by Alerian, an independent global index provider, ETF Trends stands in a position to contribute a wealth of information to issuers that would help meet current demands of advisors and investors.
ETF Trends is in the unique position to register trends within the financial world by analyzing the information that investors and advisors are searching for in terms of education and strategy, along with what research are of interest at any point in time. By being able to provide this kind of information to ETF issuers, it would potentially help them “do a better job with some of their current indexes, but also help them fill holes or gaps in their lineup specific to what advisors and investors are looking for,” Lydon explained.
Discussing the crypto agreement with Novogratz, Lydon revealed that there are eight crypto indexes already in place that will cover everything from blockchain and crypto miners, owners and enablers to futures, as well as including other crypto ETFs within the new indexed ETFs.
Investing in China Amidst Volatility
As a major indexer looking at the China regulations and market responses, Draper said, “it’s really kind of engagement based on client demand,” on their end and that they can offer indices depending on where that demand lies, thus remaining fairly neutral.
On the flip side, Lydon discussed recent conversations with KraneShares’ CIO Brendan Ahern, who pointed out how frequently the saber rattling between the U.S. and China happens. “There’s no way that we’re going to separate the capital markets of China and the U.S. They’re too intertwined at this point,” Lydon said, but that ultimately the choice in having China exposure in a portfolio lies up to the investor.
Draper closed by giving a broad look at how decision making within the committees happens for the Dow Jones and S&P, explaining the governance process “is something we take very seriously; it’s really the heart of our brand,” Draper said.
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