On this special New Year’s episode of “ETF of the Week” podcast, VettaFi’s Head of Research Todd Rosenbluth joined Chuck Jaffe of Money Life to talk about the year in review. The two discussed the top ETF stories of 2024, including the record-breaking $1 trillion in ETF industry AUM, the rise of bitcoin ETFs, and ongoing adoption of options-based ETFs.
Chuck Jaffe: One fund industry, never bigger or better than now, and the experts to talk about it. This is a special edition of the “ETF of the Week.”
Yes, welcome to the “ETF of the Week,” where under ordinary circumstances, we’re looking at new, newsworthy, trending, timely, and unique ETFs to talk about. But this week it’s our second special holiday, or New Year’s edition, of the “ETF of the Week.” We’ll look at some of the big stories in the ETF space from 2024.
We’re doing it, of course, with Todd Rosenbluth. He’s head of research at VettaFi. And at VettaFi.com, you’ll find all the tools you need to live up to your New Year’s resolutions and make yourself a better investor in exchange traded funds. Todd Rosenbluth, Happy New Year. It’s great to see you again for the ETF for the week.
Todd Rosenbluth: Happy 2025. Wow, 2024 was a great one for us and for the industry.
Chuck Jaffe: We talked last week about the industry stories and some of the things that happened during 2024. We want to still be looking at 2024 before we spring into the New Year next week with another fund. But as you recap 2024, what were a couple of the biggest stories that stood out that people should keep in mind as we turn into the New Year?
Todd Rosenbluth: So we talked about last week about $1 trillion and counting. Oh, I guess not counting. By the time people are listening to this, in the New Year, for the ETF industry in gathering assets, one of the milestones we’re about to be celebrating is the one-year anniversary for spot bitcoin ETFs. They came to market in early January 2024.
We thought there would be some pent-up demand. But this was much more popular than certainly I, and many people — even the optimists in the ETF industry — would have had. So, the iShares Bitcoin Trust (IBIT) has more than $50 billion in assets, as you and I are talking right now. This is a product that came from zero; this was not a conversion.
I think we talked about Grayscale converting a preexisting product into the ETF wrapper. I think we talked about that roughly a year ago at this time. But the iShares product started at zero. It, was very popular; it was leading the charge.
But what’s also interesting to me is when I look through those spot bitcoin ETFs, they were close to 10. In fact, there were 10 that came to market on day one. Another one came to market soon after. Even the eighth, the ninth, the 10th largest of those products would have been a success story. Close to $1 billion for each of those products. From Franklin, from CoinShares, from Invesco; $1 billion for a new product in any other time we would be celebrating. It’s just in the same industry competing with a firm like BlackRock that pulled in $50 billion. So the spot bitcoin ETFs are by far the most topical thing that was in focus.
Chuck Jaffe: And maybe a preview for this year. Because they’ve all reached critical mass, they could all survive. Or we could see some folks basically say, “maybe this business is going to see some consolidation.” So if you had to guess, will all of those funds reach the two-year mark? I mean, they’ve gotten this big.
Todd Rosenbluth: I think they will. I think it’s profitable to run this business with close to $1 billion, if not more, in assets under management. We in the industry tend to see that $100 million mark as a threshold for profitability, and to keep the product around. And what we’ve seen is many of those firms expanded their lineup of spot bitcoin ETFs in the crypto world to include ethereum ETFs. Now, they were popular — not as popular, but still popular.
And in 2025, we’ll have a new administration. We’ll have a new head of the SEC. We’re likely to see more products. But we’re also excited in the crypto space because we now have options — ETF options tied to these products that we can see. Some of the derivative-based ETFs are options-based ETFs that were popular in 2024.
We’re going to see in 2025 options-based, or downside protection strategies, tied to bitcoin. We have firms like Calamos — an innovator among those planning on launching products imminently, possibly in January, if not in February. That just makes it exciting because the options-based world in the ETF spaces has been exploding as well.
Chuck Jaffe: So let’s pick up on that story, because I know it’s one of the other big ones. There was a stretch there where it seemed like whether I was talking with you or I was reading the emails I get from fund companies about what they’re doing, all I was hearing about was covered call strategies and those sorts of things. How mainstream are they becoming?
This was something that you used to go, “oh, I’ve got savvy investors who understand the covered call strategy.” And now it seems like everybody’s being pitched covered call strategies. I’m not always sure the consumer knows what they’re getting, but they’re being pitched these because the wrapper that a covered call can provide is kind of some insurance. And in a market that feels increasingly uncertain, even though it’s been a great market, that’s been very popular.
Todd Rosenbluth: It has been. So, I tend to think of the options-based ETF world in a couple of different ways. It’s either adding income — so J.P. Morgan has a very popular suite of products, JEPI and JEPQ. I was recently at the Nasdaq to help celebrate JEPQ, which was the more popular, the Nasdaq version of that strategy.
And I think we’ve talked about NEOS in our “ETF of the Week” segments. They have had a lot of success with their S&P 500 ETF. SPYI was popular in 2024, and they’ve been building out their lineup.
And then we have the more downside protection-oriented products, like with Calamos and Innovator. Those are two firms I just referenced in their product development, but 100% downside protection or an alternative to your fixed income exposure. Innovator has a product, BALT. I don’t think we’ve talked about it this year, but we’ve seen a lot of money going in for people who want that downside protection on a regular basis. It’s bondlike; it doesn’t give you the income.
These options-based products from Calamos and Innovator are not generating income. But they’re reducing that volatility for people who are nervous, as you mentioned, that 2025 won’t be as good as 2024. These downside protection products I think have been relevant in 2024. And I think they still have a place in many portfolios in 2025.
Chuck Jaffe: There are some folks who watch the industry who say, “all of these things sound good, but eventually with an options strategy, etc., you might have a blowup. You might have a problem.” Do you worry about that? Do you think there’s another shoe to drop that will be the cautionary tale at some point on one or more of these funds?
Todd Rosenbluth: So these options-based products, they have a shelf life for the option. Not for the fund; you can stay in the fund. But if you buy them in the 12-month time period that they’re intended, if it’s a 12-month, or in the three-month time period at the beginning of it, you’re likely have a great experience.
You can always buy something at the wrong time, and then you’re not as protected as you think you would be. You’re letting the asset manager make this easy for you and to do it.
And another trend has been the actively managed ETF space. And these options-based products you could put in the active world.
But for many people, actively managed products is a portfolio manager or team that’s picking individual stocks and bonds. And we touched on last week that we’ve been seeing growing adoption in some of the firms in this space. But I want to make sure we come back to it again because active fixed income in particular was quite popular and I think will continue to be. The Fed has been cutting rates; I think 100 basis points in the end of the year that they’ve done. They’re not as likely to be cutting rates.
An active manager can be a great partner. An active ETF can be a great partner. And I think we’re going to continue to see investors embrace active fixed income products. I know we’ve talked about Pimco and about Neuberger Berman, among others, in recent segments. There’s a whole growth, a growing industry of firms that now have brought their best and brightest into the space. And that’s just really exciting to me in the ETF industry.
Chuck Jaffe: It’s one of the big stories that we’ll be looking at as we go through the ETF industry this year. I’m looking forward to that. Todd, thanks so much for joining me. We can’t wait to really kick off 2025 with the “ETF of the Week” next week and moving forward. I’ll see you then.
Todd Rosenbluth: Thank you. Happy New Year to all of your listeners.
Chuck Jaffe: The “ETF of the Week” is a joint production of VettaFi and Money Life with Chuck Jaffe. And I’m Chuck Jaffe and my show is available to you at MoneyLifeShow.com or wherever you find your favorite podcasts. Now if you’re looking for information on your favorite ETFs — or the ones that could be your favorite if you live up to your New Year’s resolution to be a better investor this year — then go to VettaFi.com and dig into the information that’s there.
They’re on X @Vetta_Fi. Todd Rosenbluth, their head of research, my guest; he’s on X as well @ToddRosenbluth.
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