ETF Prime: Vanguard's Rich Powers Talks Flows, Fees & More

On this week’s episode of ETF Prime, host Nate Geraci is joined by Tom Hendrickson, president of ETF Trends and ETF Database, to cover polling results from a recent investor symposium held alongside Investopedia. Kelly Hunt PLLC’s Aisha Hunt is also on to speak about the legal and regulatory side of ETFs. Also, Vanguard’s Rich Powers discusses the record-breaking flows into ETFs seen in 2021 and his concerns for challenges posing investors for the coming year.

First up to speak with Geraci is Hendrickson. Earlier in the month, ETF Trends hosted the ETFs ’22 symposium with Investopedia, during which thousands of attendees were polled on various ETF and market-related topics. This led to some interesting takeaways, ranging from market sentiments to where the best returns may be, from crypto to ESG.

Hendrickson notes that the audience was made up of around 68% individual investors, 24% advisors, and 8% institutional investors. With that sort of spread, there was implicit and explicit data to get and rely on for teasing out specific market concerns.

For example, Investors believe that the U.S. stock market still has room to run upward over the next 12 months. Hendrickson reveals the results, showing that 76% were more certain of positive returns, while 24% think there will be a flatter environment. “I think you can look at it one of two ways: Where are we at this point in time, and then where does this look from a sort of normalized distribution of returns,” says Hendrickson.

With that said, there are many reasons why bullishness in the continuation of great returns we’ve seen over the last 10 years, particularly in U.S. equities, makes sense, but just as much reason for investors to be cautious.

For an ETF-related poll, Geraci brings up the question, “What will be the dominant themes of 2022: disruptive tech, energy, blockchain/DeFi, or crypto?”

Attendees picked energy as the most dominant theme, at a surprising 31.3%, followed by disruptive technology at 25.7%, blockchain/DeFi at 22.2%, and finally crypto at 20.8%. Investors are certainly concerned about inflation, and there’s a clear line to draw to performance and how this manifested in portfolios in 2021.

Power’s Big Picture Thoughts

Next up is Rich Powers, head of ETF and index product management at Vanguard, the country’s second-largest ETF issuer. As Powers is great at thinking about the big picture, Geraci speaks with him about Vanguard ETF flows, bond ETFs, ETF fees, and more. There are also some thoughts on the SEC now targeting index providers and whether or not it holds too much power.

Geraci points out some of Vanguard’s 2021 stats, such as the $325+ billion in ETF inflows, which shattered the previous record. Additionally, Vanguard had six of the 10 most popular ETFs, including the top two flows-getting funds. There was also the successful launch of the Vanguard Ultra-Short Bond ETF (VUSB) in 2021. These are impressive stats, but as Powers states, the goal is “to serve investors really well.”

A large part of that success originates from Vanguard’s key low-cost offerings, which has always been a part of the firm. The funds also track really well, which is great for the investors who understand the power of the Vanguard brand. “The wide array of products we offer meet a wide array of investor preferences,” Powers adds.

Law & ETF Order

Finally, Aisha Hunt, founder of Kelly Hunt PLLC, provides a behind-the-scenes look at the legal and regulatory side of ETFs, including her takes on topics such as bitcoin ETFs and mutual fund to ETF conversions. Hunt has previously worked with some of the biggest asset management firms in the country.

On the topic of bitcoin ETFs, Geraci notes how there is still no spot bitcoin ETF, despite all the progress recently made. Hunt responds by explaining her role in helping to bring one to launch.  Part of this effort involves listening to SEC Chair Gary Gensler and their concerns around price manipulation and various safeguards.

“I think it’s going to be challenging for ETF issuers to continue to propose the same ETF structure,” Hunt adds. “I think a lot of ETF issuers have done a phenomenal job with educational efforts. With the SEC staff, I think it’s important to build on those education efforts but also to propose a more creative structure that more sufficiently addresses the SEC’s concerns.”

Listen to the Entire ETF Prime Episode Featuring Tom Hendrickson:

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