On this week’s episode of ETF Prime, host Nate Geraci is joined by Tom Hendrickson, Chief Executive Officer of ETFdb.com, who discusses his journey into ETFs and offers a unique look at what advisor data says about the current state of markets. This episode also features Janus Henderson’s Nick Cherney, who spotlights the AAA CLO ETF (JAAA), and FLX’s Jillian DelSignore, who discusses ETF distribution, including the use of ETF model portfolios.
An Origin Story
Hendrickson explains how he’s been heavily involved in finance and data ever since the dot-com bust in the 2000s. This led to his involvement with Investopedia.com in late 2002, which was all about digitalizing the jargon related to the financial markets.
It’s good to note that this was coming about before Google became the primary search engine for organic online searches. This lasted for years from a position of anonymity as web traffic grew. In the summer of 2007, Investopedia was bought by Forbes.
Fast-forwarding to the world of ETFs, Hendrickson explains how there was a sincere interest in the product in its earlier days, even if it wasn’t the most robust of areas to tap into at the time.
“I bet that there was going to be a growth within that ETF Wrapper, and I started educating myself about it and where it could go,” Hendrickson adds.
The next move was to get involved in ETF Database, kicked off in early 2012. The ETF market was at around $500-600 billion at that time, but the growth rate was phenomenal. It became a matter of Hendrickson applying what he had learned through the Investopedia experience and bringing that to a content production plan relating directly to ETFs.
As Hendrickson explains, a big part of the overlay shift was “the move from more of an individual investor focus to a financial advisor focus.” As the advisors were really embracing the market, the writing was on the wall when it came to incorporating ETFs into their larger portfolio construction.
Trendy Next Steps
In early 2019, Hendrickson partnered with CEO Tom Lydon, who had been building ETF Trends since 2005. The two companies, ETF Trends and ETF Database, were brought together, which led to building out a team to support this connectivity with the advisor community. The idea was to rely on the intelligence regarding data collection as an input for the content creation process, including articles, podcasts, videos, webinars, and more. This has since become a powerful engine for the advisory community.
“They tell us what they are looking for through their implicit actions,” Hendrickson states. “We’re able to learn what they are most interested in and how that is changing over time.”
This has led to heavy categorization of the content to map to the many narratives advisors and investors are interested in. Applying that to a current state, Hendrickson brings up the mystery surrounding inflation. People want to know if it’s transitory and what the risks could be going forward. This has been a concern for advisors since last summer. The result has been a lot of website engagement regarding commodities and financials.
The interesting thing to learn was understanding that whether or not inflation will be transitory, advisors were interested in learning what the results would be in the event of either scenario. This means producing content that provides advisors with practical resources.
“The one thing that is tough to overemphasize is the amount of work across our team has put into getting into a position in collecting that type of data,” Hendrickson adds. All of this is a way of noting how, whether it comes to inflation or crypto or whatever piece of data advisors deem important, there’s a system in place at ETF Trends and ETF Database that will provide the resources for what they are looking for.
Later in the episode, Cherney makes a case for considering collateralized loan obligations (CLOs) as part of investors’ bond portfolios, which includes thoughts on why they are particularly interesting, considering concerns around rising rates and inflation currently. For those not overly familiar with CLOs, Cherney provides a great primer on all of the basics of that market.
DelSignore then wraps up this episode by discussing how ETFs ultimately end up in investor portfolios. It’s an involved topic, but DelSignore goes through some of the trends she has seen, including ETF model portfolios, a major distribution channel for ETFs.
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