The Exchange, the world’s largest ETF conference, kicks off Monday in Miami Beach. These are good times and difficult times for the financial advisory industry.
Good time, because this is the first time the ETF industry and ETF-centric advisers have been together for more than two years. But investors throw money into ETFs, often in the form of dormant (index) funds, but only a small amount of actively managed funds.
Assets under management have gone from $ 5 trillion to $ 7 trillion in two years.
Hard times because the markets are in turmoil: a lot of money is moving in, and the consultants who attend the event are looking for answers to what to say to their confused clients about what happens when they return home.
Geopolitical risk will take the seat behind inflation concerns. ETF Trends, one of the conference organizers, said in a survey of thousands of financial advisers over the past two weeks that the No. 1 concern was that interest rates were rising:
Which of the following worries you the most about the markets right now?
Rising Interest Rates / Inflation 43%
Geopolitical risk 34%
Prolonged recession 13%
Market volatility 8%
Dividend stability 2%
Source: ETF trends
Money moves in tons. “More money is in circulation than we have seen in a decade,” Tom Lyden, conference organizer for ETF Trends, tells me. “Investors and advisers are more concerned about rising rates on their fixed assets and the threat of inflation than on their equity assets.”
In fact, there are plenty of indications that advisers are moving away from the traditional asset allotment of 60% / 40% of the shares to securities. “70/30 is the new 60/40,” Lydon said.
Treasuries and mortgage support securities are particularly under pressure, with many bond ETFs near or below the new low.
Big Cap ETF Funds: New Depreciation
Vanguard Total Deed (BND)
BIMCO Active Bond (Bond)
iShares Core US Total (AGG)
iShares Investment Grade Corporate (LQD)
iShares Muni Bond (MUB)
At the same time, there are record levels in money market funds ($ 5 trillion) and short-term bond ETFs.
Shares: More to come. Although the S&P 500 is down 5% to date, large, indexed equity ETFs continue to attract huge receivables at the expense of more expensive mutual fund competitors. Vanguard S&P 500 ETF (VOO) has attracted $ 26 billion to date, compared to its rival iShares Core S&P 500 ETF (IVV) $ 13 billion.
Other megacop equity ETFs such as the SPDR S&P 500 (SPY) and Invesco QQQ (QQQ) have also been credited.
Not performing well: International, value and small ETFs were off to a good start in January, but as Russia / Ukraine tensions escalated, demand eased.
Ingredients: They are definitely hot. Invesco Optimum Yield Commodities ETF (PDBC), which has futures contracts on 14 products, is leading the way with $ 8 billion in assets this year.
What does this movement mean? “This means investors are nervous,” Dave Nadick, a financial futurist at ETF Trends and one of the conference organizers, told me. “There is no clear signal from the flows, but it is clear that people are redistributing their portfolio. We live in a state of extreme uncertainty. There is no clear story. Some are worried about inflation. Some are worried about retirement income. Some are worried about Ukraine.”
The crypto industry is lagging behind the SEC. A pure-play Bitcoin ETF will be the biggest incentive for the crypto community for many years, but the SEC year after year rejects applications and instead approves Bitcoin Futures ETFs.
But the industry wants Bitcoin ETFs, and this could be the year the industry is pushed back.
Grayscale Bitcoin Trust (GPTC) is awaiting the SEC’s decision on its application for conversion to Bitcoin ETF, which is due in early July. Michael Sonensen, CEO of Grayscale, has indicated that he could be prosecuted if the SEC rejects him. What are the legal reasons for a lawsuit? Sonnenshein speaks Tuesday morning; Let’s ask him on ETF Edge on Monday at 1pm
Agile management: Still companies are jumping on the bandwagon. This year, the Capital Group, which manages US funds, jumped into the active management ETF game. Newberger Berman also comes in.
“The floodgates are open and everyone is going to go to the active place,” Nadik said. “There is an entire generation that loves ETFs. Every asset manager is going to have an ETF product. Where the money is.”
Another big name is throwing his hat into the ETF ring: Morgan Stanley plans to launch its first ETF later this year (the bank also has Eden Vance, which already has ETF offers).
Consider these speakers:
Cathie Wood, CEO of ARK Invest, on Tuesday at 4:55 p.m. I will be interviewing you with a solo interview with me on CNBC at 4pm
DoubleLine CEO Jeff Gundlach will deliver a keynote address at 10 a.m. Tuesday on his macro-economic outlook and market outlook.
Rick Edelman, former CEO of Edelman Financial Engines, on Tuesday, at 3pm on CNBC Pro, talks about how crypto works in various portfolios.
Edelman sold its business Edelman Financial Engines last year. He has published a new book, The Truth About Crypto.