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ETF Prime: The World of ETFs with Todd Rosenbluth

On this week’s ETF Prime, host Nate Geraci was only joined by one guest, but a special one, VettaFi’s head of research, Todd Rosenbluth. Together, the two discussed the whole world of ETFs, including thoughts on flows, the year’s biggest ETF stories, new launches and entrants, SEC filings, and more.

As Rosenbluth explains, the market is on pace for over $600 billion of net inflows in a year, the second highest cash haul ever. When the US stocks were in a bear market, it was the worst first half for the Bloomberg AGG in its history, and the dollar’s strength has significantly hurt returns for most international ETFs. However, VOO pulled in $28 billion year-to-date, and $IVV pulled in $15 billion. In 2021, through the same date, (VOO A) had $31 billion, and IVV  had $15 billion.

“That’s what has stuck out to me,” Rosenbluth states. “Investors and advisors continue to use ETFs as their vehicle of choice.”

Additionally, bond mutual funds have seven straight months of net outflows totaling more than $300 billion, and bond ETFs are gathering $100 billion. This is unprecedented.

In looking at top ETFs in terms of inflows – there are three noteworthy items from Rosenbluth’s perspective: (VTV A), (SCHD A), and then the four iShares Treasury ETFs ((TLT B+), (IEF B+), (SHV B+), & (GOVT A)). All of these are excelling this year in terms of flows.

Using the monthly average, secondary volumes across Treasury ETFs increased by nearly 50% in the first half of 2022, far above the 3% increase in nominal Treasury average daily volume, based on the Bloomberg and SIFMA data. The iShares Treasury ETFs averaged a substantial 73% of secondary market Treasury ETF volumes in the first half of 2022.

As far as any other ETFs outside the top 10 inflows worth noting, the JP Morgan Equity Premium Income ETF (JEPI A) pulled in $6 billion and is now at $11 billion. The Invesco BulletShares Corporate Bond 2024 ETF (BSCO B+) target maturity ETF from Invesco pulled in $1.5 billion and is now a $3.1 billion ETF.

The Biggest ETF Story of the Year

Aside from VettaFi being formed and bringing ETF commentary, data, and indexing expertise together, Rosenbluth humorously notes, there’s the near shut down of ETF investing in Russia. Russia used to be part of BRIC, and single-country ETFs like (RSX B) and (ERUS B) went quickly from highly speculative bets on a Russian recovery to being halted indefinitely.

Rosenbluth recalls going on CNBC as the volume spiked and saying people were not buying at a discount to NAV as they thought they were buying a product that would be shut down. He only wishes that was accurate since the money is still locked up in worthless assets.

Countering that lack of activity, there are some launches to highlight. The Single stock-related ETFs are serving as the story of July. (TSLQ ) has been trading strong out of the gate, and there are now even more single-stock ETFs. TSLH, a downside protection version, launched today.

Additionally, the DoubleLine Shiller CAPE US Equities ETF (DCPE) is based on the $6 billion mutual fund that was the best performing large cap value funds over a three-year period for five straight years. It has a straightforward approach. DCPE owns four of the five most undervalued sectors through swaps (minus the value trap) and adds some active fixed income from one of the best managers. The fund updates monthly, but at the end of June, it held real estate, technology, financials, and consumer discretionary. This is a strategy that warrants more attention.

While there’s more said, Rosenbluth is also eagerly awaiting the launching of ETFs from Alliance Bernstein and Morgan Stanley. Noel Archard and Tony Rochte are two of the ETF industry heavyweights that are building out ETF teams. Alliance Bernstein filed for active bond ETFs in May. Capital Group has proven there’s room to grow if investors tap into the expertise, scale, and work to educate advisors about what makes offerings unique.

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