On this episode of ETF Prime, host Nate Geraci speaks with a pair of individuals discussing several different ETF-related topics. His guests include VettaFi’s Lara Crigger, who goes in-depth on a plethora of subjects including spot Ethereum ETF filings, fixed income ETF flows, and more. Geraci also speaks with Franklin Templeton’s David Mann who discusses his firm’s approach to several different ETF strategies.
Spot Ethereum ETF Filings
Geraci opens the podcast by speaking with VettaFi’s Lara Crigger, discussing spot Ethereum ETF filings. Geraci sets the stage by highlighting some of the firms that have previously filed for this style of fund. He then asks Crigger for her thoughts on firms filing for funds like this following Grayscale’s win.
“I think they were inspired to file for these funds by the Grayscale ruling, and I am not surprised it came in a crowd,” said Crigger.
Crigger mentions that it is always a race to be the first to market when these sorts of events happen. She believes that the Grayscale ruling did change the game for all crypto-related filings. Crigger believes that the ruling solved the SEC’s biggest hold up, which was the surveillance issues. However, she isn’t sure how many investors will be interested in these types of funds. The pair go on to discuss the ruling and crypto ETFs in-depth.
Flows Into Fixed Income ETFs
The conversation then shifts to fixed income ETFs stemming from a conversation Geraci had last week with VettaFi’s Tom Lydon. Geraci believes that where the economy currently is, a fund like the iShares 0-3 Month Treasury Bond ETF (SGOV) which offers a 5.3% SEC yield with no duration risk seems like a better proposition when compared to iShares 20+ Year Treasury Bond ETF (TLT). Nonetheless, Geraci highlights that TLT has seen significant inflows this year. Crigger believes that short-duration risk funds do currently offer an extremely compelling case. She also mentions that a lot of investors and advisors tend to agree with Geraci’s point. However, Crigger points out that regardless of the interest these funds have gained they still come with risks of their own.
“Short-duration funds do not come without their own risks, right? You are subject to market timing issues,” said Crigger.
She highlights that today’s market seems to be changing more frequently, so this risk may be even more prevalent now than it had been in the past. Crigger also points out that these appealing yields may not last forever; that all depends on what happens with the Fed. However, short-duration bonds are still extremely popular among investors. Crigger believes an underappreciated fund in the short-duration ecosystem is the WisdomTree Floating Rate Treasury Fund (USFR). The pair go on to discuss the significant amount of flows several other short-duration funds have taken in.
Nasdaq 100 ETFs
Geraci and Crigger then move onto another interesting story this year, which is the performance of the Nasdaq 100. Geraci highlights the Direxion NASDAQ-100 Equal Weighted Index Shares (QQQE) as an ETF that has performed exceptionally this year, and he believes came as quite a surprise to most people. He mentions that there is a story that has sort of fallen under the rug this year with Invesco QQQ Trust Series I (QQQ) which has had about $700 million in outflows this year despite its commendable performance. While the Invesco NASDAQ 100 ETF (QQQM) has taken in almost $6 billion dollars this year. Geraci then asks Crigger if the two funds’ expense ratios may have something to do with that data.
“I think the fee difference both is and isn’t the reason why QQQM is taking in all of these assets,” said Crigger. She believes that if investors are betting on the Nasdaq 100 performing well for the long term, then they look to QQQM, but if they are looking for liquidity then they will most likely look to QQQ.
In addition, the pair discuss Amplify ETFs’ purchase of ETFMG’s ETF lineup, VettaFi’s acquisition of the EQM Indexes, and more.
Franklin Templeton’s Approach
To close the podcast, Geraci brings on David Mann, the head of ETF products and capital markets at Franklin Templeton, to discuss his firm’s approach to several different ETF strategies. Geraci highlights how the firm has 60 ETFs and over $13 billion in ETF assets. The firm has also seen nearly $3 billion dollars worth of inflows into the Franklin Templeton ETF lineup this year. He then asks Mann what the firm’s main drivers of success have been in 2023. Mann highlights the launch of funds that have strategies like smart beta, active, and passive as possible drivers.
“We have seen some nice growth in all three of those sorts of pillars in our lineup,” said Mann.
Mann highlights that their passive funds have brought in about $1.5 billion, while their smart beta funds have brought in nearly $700 million. The firm’s active funds have also brought in the considerable amount of $400 million. Mann believes giving all of those options to investors is what has contributed to the firm’s success this year.
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