By Michael Venuto
At the ETF Think Tank, we research the opportunities and pitfalls of the growth of the ETF Industry. This research is intended to support the growth of advisors and the portfolios of clients. Growth is a common theme throughout these concepts, but goes beyond just assets and includes innovations, client service and research insights. So far in 2020, despite massive social, economic and health challenges, many financial instruments connected to ETFs have experienced substantial growth.
The chart provided above from Eric Balchunas highlights the near-record flows for ETF assets, despite the volatility of 2020.
In past research, the ETF Think Tank has contended that a market downturn would result in an ETF asset boom, due to investors leaving mutual funds when markets slide but choosing to invest through ETFs when they return.
Return of the Retail Investor
Beyond ETFs, the retail investor has returned through new platforms like Robinhood and SoFi Invest. This phenomenon was accredited to the lack of sports betting in the early days of the pandemic, but as the chart below shows, it appears to be here to stay. Many of these investors use ETFs or individual stocks, but no mutual funds. The chart below from Robintrack.net compares the performance of the S&P 500 to the trading activity of Robinhood users.
Direct Indexing Acquisition Growth
Direct Indexing has been called a potential ETF killer. At the ETF Think Tank, we have seen it more as a compliment, driving mutually beneficial growth. That said, large traditional institutions have used acquisitions to enter this 25-year-old industry of customization in a big way in 2020. Fellow ETF Nerd Nate Geraci provides commentary on three of the biggest deals in this space so far this year:
Bitcoin’s Volatile Growth
Many ETF-focused investors look to Greyscale Bitcoin Trust $GBTC when seeking Bitcoin exposure. To be clear, $GBTC IS NOT AN ETF. That said, it does show the demand from traditional investors when we go back to Nate Geraci to look at the billions in flows during 2020.
There are many opinions on the volatile price movements of Bitcoin and the overall growth of the protocol network value. Beyond price, institutional adoption has grown exponentially with adoption by CEOs of public companies like Michael Saylor and Jack Dorsey. Nate also pointed out that traditional fund managers like Guggenheim are now embracing the crypto-currency opportunities.
Bottom Line Growth
Without a doubt, 2020 has been difficult, terrible, and sometimes tragic. That said, the innovations in financial services linked to ETFs have seen massive adoption and growth. Although this small bright spot in our industry is encouraging, it is important to remember and respect that the pandemic also continues to grow. Be diligent, stay safe and celebrate small victories.
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