ETF Zoo: Is the ’80’s Stock Picking Era Really Back?

Welcome to our inaugural episode of ETF Zoo, where we check into the latest happenings in the wild world of ETFs. Hosts Dave Nadig, President and Director of Research at ETF.com, alongside Sumit Roy, Senior ETF Analyst at ETF.com, dig into recent ETF industry trends. They are joined this week by Elisabeth Kashner, CFA, Director of Global Funds Research at FactSet and Todd Sohn, Senior ETF & Technical Strategist at Strategas Securities. From the growth of active to the Invesco QQQ proxy and 5x leveraged ETF filings, the group discussed the latest hot topics mid-October.

Topics and Timestamps

• [00:01:05] Mid-Year ETF Trends and the Active Wedge: Elisabeth Kashner kicks off the discussion with a look at mid-year ETF trends, noting a split in the ETF customer base. One segment is cost-conscious and seeks low-cost, broad-based "vanilla" funds, which still hold the largest market share. The other segment is less cost-sensitive and is seeking active management (or "pizzazz"), at the expense of strategic or "smart beta" funds.
• [00:04:10] The Evolving Nature of Active ETFs: The discussion moved to whether the rise in active is a true resurgence of stock-picking or a technicality. With the lines increasingly blurred between active and passive, Sumit Roy underscored the importance of understanding what’s under the hood when it comes to individual funds.
• [00:06:03] Year-to-Date Flow Stories: Overall ETF flows this year are significant, already surpassing $1 trillion this year. The massive run-up in technology and growth stocks (making up 35%+ of the S&P 500) has led investors to seek ways to surround this concentration risk. Todd Sohn breaks down where investors are – and aren’t – investing so far this year.
• [00:11:30] The Flood of New Crypto Products and Staking: Discussion turned to the incoming deluge of new crypto products, including baskets of altcoins (Polygon, Cosmos, Sui) and the filing for an actively managed crypto basket ETF by T. Rowe Price. The introduction of ethereum staking in ETFs by Grayscale brings a dimension of competition, as it allows ETFs to offer varying yields and risk profiles.
• [00:17:20] Invesco's QQQ Proxy Battle: Recorded before the proxy outcome announcement, the group holds a rapid fire discussion about Invesco's costly, prolonged effort to get investors to vote on converting QQQ to a modern structure. All four participants stand in unanimous agreement about the then impending proxy outcome.
• [00:21:00] 3x and 5x Leveraged ETF Filings: The panel weighs in on the new filing for 3x and 5x leveraged ETFs and votes on likelihood of passing. With a government shutdown thrown into the mix, where does that leave filings like this?
• [00:23:26] The ETF Share Class Arrival: The final rapid-fire news item discussed was the near-certain approval and launch of the ETF share class structure. The group shared which issuer, if any, they believed would actually get out of the gate by the end of the year, and the challenges this new share class brings.