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5 days ago
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Investors Turn to Defined Outcome ETFs Amid Market Turmoil
It's always good to have a buffer zone. Defined outcome ETFs, characterized by their caps on gains and limits on losses, are becoming important investment tools for advisors looking to mitigate the impact of market downturns on their clients' portfolios. Since its inception in 2018, the defined outcome ETF market has grown to more than $60 billion, despite the product's increased complexity, and the fact that many advisors don't fully understand how the funds work. Still, the US defined outcome market is expected to expand to $650 billion by 2030, according to recent research from BlackRock and Morningstar in December. READ ALSO: Racing to Keep Up With Dual Share Class Applications and Not Taking Single-Stock ETFs for Granite A reason for the recent uptick in popularity is that defined outcome ETFs can be used as alternatives to the standard 60/40 portfolio, according to panelists at ETF Global's annual ETP Forum in New York City. Newer generations of advisors and their clients are also increasingly likely to use buffer ETFs as part of their more modernized portfolio strategies. The BlackRock study found that since 2019, nearly 500 defined outcome ETFs have launched, a trend driven by 'policy and macroeconomic uncertainty, higher market volatility, and demographic shifts, such as the increasing number of retirees globally.' The research also found: Less than 1% of advisors were using outcome ETFs in 2019, compared to more than 10% now. Allocations to the product have also risen 5 percentage points over the past five years. Still, nearly 90% of advisors don't currently use them, according to data that the asset management firm gathered on more than 22,000 advisor models. International Affairs. There's also the importance of international diversification, particularly following President Trump's 'Liberation Day' tariffs and the market turmoil that followed, the experts said. Non-US investing has surged with emerging market investments — and allocations in markets like China — taking the place of more standard S&P 500 products. And while defined outcome ETFs have traditionally been regarded as 'competing' with their traditional counterparts, the two can actually end up complementing each other, they added. This post first appeared on The Daily Upside. To receive exclusive news and analysis of the rapidly evolving ETF landscape, built for advisors and capital allocators, subscribe to our free ETF Upside newsletter. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
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5 days ago
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Not Taking Single-Stock ETFs for Granite
Will Rhind has watched the ETF business for more than two decades. He was an original member of the iShares team — back when it was part of Barclays — and he was later CEO of World Gold Trust Services, the sponsor of the now $98 billion SPDR Gold Shares ETF (GLD). He left that company in 2016 to found GraniteShares, which has built out an extensive line of leveraged single-stock ETFs. Rhind, who has roots in the 'Granite City' of Aberdeen, Scotland, joined ETF Upside for a conversation about the burgeoning world of single-stock ETFs. GraniteShares filed last week with the Securities and Exchange Commission for 25 additional leveraged single-stock ETFs. Rhind did not discuss the pending funds, given that they are in the registration period, but he talked about where the firm is headed. READ ALSO: Grayscale Wants in on Quantum Computing ETFs and BlackRock's 'Widow Maker' ETF Is Suddenly in High Demand ETF Upside: How did GraniteShares get its start, and why did you decide to focus on leveraged single-stock ETFs? Will Rhind: When we started GraniteShares, there were only two companies in the US allowed to do leveraged ETFs, and that was a weird regulatory quirk at the time. The leveraged ETF market hadn't had a lot of innovation for a long time, and the SEC updated the rules around ETFs back in 2020 or 2019. That allowed anybody to do leveraged ETFs; there were all sorts of harmonization things that came with it. There was 'white space' on the leveraged side in doing leverage on single stocks, which no one had done before, and so that's what we started to do. We'd actually done it in Europe first, because we couldn't do it here. So we started the first levered single-stock products in Europe, and then bought them here when we were able to. What do you hear from investors about how they're using the products? I assume most people are aware of the risks and are trading daily. The great thing about ETFs is that there are so many different ways to use it. The directional — two times long, two times short —is one obvious application, but you're able to trade in the pre-market —so before the open, after the close — which is a big benefit against things like options. For example, you're able to short or take an inverse view, which is very useful in environments like this year that we've seen so far. And then, there are other strategies around creating tax events you know could be using short, for example, to generate a taxable loss that you can often offset against gains elsewhere in the portfolio. How do you decide what strategies to pursue? How long do you give a particular strategy if it doesn't catch on? What are some examples of what's worked well and what hasn't? With any ETF, it's much more of an art than a science. Predicting exactly what the market wants is seriously difficult. You can look at a few obvious things when it comes to single stocks: You can look at the size of the stock, the amount that it trades. You can look at different sorts of forecasts. You can look at the amount of mentions it gets on social media. You look at all these things, but ultimately, investors have to buy it, and there has to be that sort of unique cocktail of enthusiasm around it, which is just difficult to predict. Nvidia, for example — that's our biggest — NVGL, two times Nvidia. And that one, it's obvious to everybody now, but it perhaps wasn't as obvious at the time when we launched it, because it was before ChatGPT was released. So I think those in the know knew Nvidia was a good company, but it obviously, absolutely caught on fire after the release of ChatGPT, and everybody had their eyes opened to the potential of AI. When a product doesn't work, it's just a profitability calculus. It's binary — it's either profitable or it's not profitable. There's no hard rule in terms of how long we'll keep it. But we'll look beyond profitability, at things like trading volume. What categories are you planning to expand in? We love what we call 'high conviction' products, and leverage is in that category. Crypto is in that category. Options-based income is in that category. Options-based income is probably the one where we think there's a big amount of potential, and we're expanding in that space with our YieldBoost brand. Leveraged single stocks is also one where we want to expand the number of products we offer there, but it's always according to demand of the market. And then outside of that, it's really just based upon your market conditions and what sort of investment or key investment trends are identified at that time. This post first appeared on The Daily Upside. To receive exclusive news and analysis of the rapidly evolving ETF landscape, built for advisors and capital allocators, subscribe to our free ETF Upside newsletter. Sign in to access your portfolio
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7 days ago
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BlackRock's ‘Widow Maker' ETF Is Suddenly in High Demand
With a nickname like 'widow maker,' you'd think investors would stay away. The iShares 20+ Year Treasury Bond ETF (TLT), which got its moniker because of its recent poor performance — took in $1.3 billion assets in the past week, according to CFRA Research. Since long-term Treasury bonds are more susceptible to the effects of interest rate changes as they mature, short or intermediate bonds are often more appealing. And for TLT, if investors bought the fund five years ago, they would have lost some 45% of their original assets, according to the Financial Times. But, it looks like long-term products are increasingly on the menu. 'TLT is often used by investors to buy the dip when they think [Fed interest] rates have peaked,' said Aniket Ullal, head of ETF Research & Analytics at CFRA. 'We may be seeing similar behavior here since inflation numbers have been fairly benign recently.' READ ALSO: Nasdaq Wants to Wrap This $11.5B Altcoin in an ETF and Vanguard's 2 New Muni ETFs Have an Advantage Over Mutual Funds The bond market had a small win last week as both 20-year and 30-year Treasury yields began trading just below 5%, the first time since May 20. And while President Donald Trump doesn't have the authority to lower interest rates, he's made his position well known, recently telling Fed Chair Jerome Powell he's making a 'mistake' by not lowering them. Plus, who could forget all that volatility? All this could be contributing to TLT's momentum. 'Investors in long-term Treasury bond ETFs like TLT will win if the US economy weakens significantly and investors believe the Fed will need to cut rates aggressively,' said Todd Rosenbluth, head of research at VettaFi. However, he noted that TLT doesn't have the strongest track record, and taking on significant duration risk has not been rewarding for investors: Over the past five years, the fund has taken in roughly $50 billion in inflows, per VettaFi data. But, its performance is down nearly 50% in that same time. 'Timing this trade can be very difficult,' Ullal told Advisor Upside. This post first appeared on The Daily Upside. To receive exclusive news and analysis of the rapidly evolving ETF landscape, built for advisors and capital allocators, subscribe to our free ETF Upside newsletter. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
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29-05-2025
- Business
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American Century's Head of ETF Solutions to Depart
American Century is losing its head of ETF solutions, Rene Casis, who joined the firm just before it launched its first exchange-traded fund in 2018. In regulatory filings late last week, the company disclosed that Casis will soon no longer be a portfolio manager on 11 ETFs. An American Century spokesperson confirmed in an email that Casis will leave the company in about three weeks to 'pursue another opportunity' and that a search is underway for a successor. 'His last day managing portfolios is June 11,' the spokesperson said. 'He remains with the firm until June 20 to assist as needed.' This story was originally published on The Daily Upside. To receive exclusive news and analysis of the rapidly evolving ETF landscape, built for advisors and capital allocators, subscribe to our free ETF Upside newsletter. With about $60 billion in assets among its 47 ETFs, American Century is not one of the biggest players in the industry, though still among the top 20 ETF issuers broadly. But the company has made a niche in actively managed ETFs, with a focus on semitransparent ETFs, which disclose their holdings quarterly, rather than daily, and show a proxy basket of securities to give investors a rough idea about the portfolios. Through its Avantis Investors subsidiary, American Century is among the four biggest active ETF issuers by assets. Casis, who has been with the firm as it built out its active and semitransparent ETF business, is a portfolio manager on several products with that structure. While six of the 11 ETFs he is on have two portfolio managers, others have larger teams. The largest ETFs that Casis helps manage include: US Quality Growth ETF — $1.5 billion, team of two managers Quality Diversified International ETF — $326 million, two managers Focused Dynamic Growth ETF — $284 million, four managers Focused Large Cap Value ETF — $253 million, five managers Moving On: All but one of the nine $1-billion-plus ETFs in the company's line are managed by, and branded under, its Avantis Investors subsidiary. Casis is not part of that unit. 'Generally we have a constructive view of the ETF business under American Century,' said Hyunmin Kim, an analyst on Morningstar's multi-asset strategies research team. 'Avantis is a bright spot.' The post American Century's Head of ETF Solutions to Depart appeared first on The Daily Upside. Sign in to access your portfolio
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29-05-2025
- Business
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Vanguard's 2 New Muni ETFs Have an Advantage Over Mutual Funds
Who wants some beta? Vanguard rounded out its municipal bond fund suite last week with a pair of passively managed tax-exempt funds: the Long-Term Tax-Exempt Bond and New York Tax-Exempt Bond ETFs. The strategies are new, not replicating existing mutual funds from the company's extensive product line. There are, however, two active mutual funds in the same category, the Admiral shares of which charge 9 basis points — the same fee charged by the passive ETFs. But there is still a draw for index-level returns, or beta. 'Some clients just want the beta,' along with the low cost and ease of operation with an ETF, said Perryne Desai, senior fixed income product manager for the two new funds. 'Now that bonds are actually yielding something and they are a safe harbor … there is no better time to be in fixed income. There's no better time to be in munis.' This story was originally published on The Daily Upside. To receive exclusive news and analysis of the rapidly evolving ETF landscape, built for advisors and capital allocators, subscribe to our free ETF Upside newsletter. Vanguard has been building out its muni bond ETF line for two years, Jeff DeMaso, editor of The Independent Vanguard Adviser, said in a statement about the launch. With the additions, Vanguard has two dozen muni mutual funds and ETFs. The two new products 'won't turn heads but are practical additions to Vanguard's roster,' DeMaso said. And they don't necessarily offer a cost advantage over two existing active mutual funds, unless one takes into account the $50,000 minimum needed for Vanguard's Admiral shares — the Investor shares, which have a $3,000 minimum, charge 17 basis points for the Long-Term and 14 for the New York version. 'If you are willing to own a mutual fund (over an ETF), you can get Vanguard's active management for free,' DeMaso said. 'That's a good deal in my book.' Some of the details about the active funds: The Long-Term Tax-Exempt Fund, at $16.9 billion, has trailing returns of 0.26% over a year, 2.9% over three years, and 0.76% over five years, data from Morningstar show. The New York Long-Term Tax-Exempt Fund, at $5.1 billion, returned 0.28% over a year, 3.04% over three years, and 0.73% over five. Better for the Beta: The new ETFs are managed by Vanguard's fixed income group, whose track record in active management benefits the index team, Desai said, citing the example of the nearly 10-year-old Tax-Exempt Bond ETF, which has a beta of 0.97, according to Morningstar. 'Our tracking error is pretty darn tight, and in municipals, that's difficult to accomplish.' The post Vanguard's 2 New Muni ETFs Have an Advantage Over Mutual Funds appeared first on The Daily Upside.
