Whoa, That ETF Got Big

So the idea was something that I've been tweeting. I have certain recurring tweets, and one of the ones that I've been doing a lot lately is this tweet where I say, on today's edition of I can't believe how much an assets that E t F has now blah blah blah blah this heat, you know. And because what happens is in our team, we'll just drop tickers in and we'll look them up, and we'll be researching things

and over and over and over. I'm like, that thing has two billion, that thing has four billion, that thing has five undred million. I just when I last time I checked on it, I was like, will probably just sort of live in this little corner here, you know, maybe it'll get like ten million a year. I just am surprised at how big some of these non vanguardian E t F s are getting ones that you just rode off a little bit and you're like, what's going on here? And then you're like, well, E t F

are taking in so much cash. I mean, I guess it has to go somewhere. It's not all going to Vanguard. So I thought we would just look at some e t F that we were you know, we looked at one, you know, one day, and we're just blown away about how big they got and maybe we can talk about why. And I thought the significance of this also was like, here we are a year after really the pandemic started to take hold and markets bottomed out, and now a year later, we're, you know, back in the ball market.

Everything's up, and it it bears uh exploration of a few things that might have some underbellies. So joining us on this episode not just Eric and Mean, we have Todd rosen Bluth, the head of E t F and mutual fund research at cf are, A Athanasios, Sara Fhagus who's an E t F analyst with Bloomberg Intelligence, and Clear Balantine who's an E t F reporter with Bloomberg News. They've all been regulars on the show before this time. On Trilliance. Dude, I can't believe how big this et

F got. Todd, Claire Athanasios, welcome back to Trillions. Great to be with you. I had to be here. Yeah, thanks for having us. Hey, by the way, Joel, Yeah, Um, do you know what today is? It's funny we have Todd on the show. It's timely. I would say, you know, late March, what what's what's going on? This is this is the end of super Bet two. Okay, so this

is the due date? So okay. A year ago when the Active non Transparent et F started to launch and there was all that hype building up, It's like, oh, here come these big fish to you, real price American Century Fidelity. Um. Todd and I started to have spats both on panels and on Twitter about how big they would get. So I said it over under at ten billion dollars in the first year for what we call answer active non transparents. He took the over so as the year went on it looks it looked pretty bad

early and it stayed bad. They have about a billion so I had nine billion dollars to spare. The bet was due April one, and he owes me a steak dinner. Unfortunately, we would normally be physically there and we'd be going out to dinner that night, and then I would tweet pictures of the steak and him signing the bill and all that. It would be. We have to postpone that though,

But at least you could do it. You could do it on Zoom m I like Todd, I want to hang out with them so we have a good time together. You could hang out. It could be a Zoom steak dinner. Now that's the pressing. Yeah, that's weird pressing. We've got to do this in person. So, yes, I lost the bet. Let's put the numbers right. It's about one point five billion dollars in total for these e t f s. Again, it doesn't matter, it's much less than ten billion dollars.

But I lost this bet. Active non transparent ets have not delivered the assets we expected. They've been under the radar, and that's of course a good segment for this show because there's things that are under the radar that are actually gathering assets instead of these products. Okay, so Todd, let's start with you. What what What's one that's jumped out at you? So my pick on this and is

a wisdom Tree product. It's Wisdom Trees Emerging Market X State Owned Enterprises et F. The ticker is x s o E. It's got four point seven billion dollars in assets, over three billion dollars of inflows in just the past year. It's actually the second largest of Wisdom Trees ETF. You know people probably in fact, I was on this show talking about currency head GTS, which is what wisdom Tree has been synonymous for for over a decade. It's now

the second largest, this XO s o E product. And why because it's outperforming by having a governance slant on emerging markets. It's outperforming I E m G, the Eye shares cheap emerging market product, Vanguard's Emerging market product vw O by over three hundred basis points in the last three years. And performance works. You know, the investors are getting uh, a E s G oriented emerging market product from wisdom Tree uh And and it's working out. But

I didn't realize how big it was. Four point seven billion dollars is much larger than I would have thought. Does that worry you No, I think it's a great sign. I think we we you know, we're seeing we can have a different debate about E S G and the viability of those products. But I think it's great that it's moved to emerging markets and with a single pillar the G in governance as opposed to something that's focused on environmental which has certainly got more of the attention

as of late. You know what, I almost picked that one at once have been on my radar. I looked at a couple of months ago. I didn't realize it got so big because I think it's right behind de Grow, right, I think it was always liked grow and that one was the largest products. But it's funny we were thinking the same I looked at it. I didn't end up choosing that one, but it definitely caught my eye. That to me is a perfect example time that might be better than both of mine. That is a lot of money.

And also it's interesting two things on that one. Um Wisdom Tree has done. I thought a good job of diversifying themselves out of that currency hedged craze that has come and gone, and this is a great product and it also fits with their idea of like hey, I'm gonna give you this thing. I'm gonna take this thing out, you know, like take the yen out of Japan for d x J. This is like taking the socialism out of the the emerging markets. And at the rap On e M has always been well, a lot of these

h companies are stayed owned. They don't move that much. Um blah blah blah. We want more capitalism in there, and the E t F really I think does that well. So it's a not just performance, but the the the narrative and the solution it's providing is pretty solid too. So Joe, I need an independent ruling on this. It sounded like Eric says my pick is better than his picks, and so the bet evens out. We just are going to split the check when we have a steak. Is

that right? Is that how you heard? I did not? I heard a fraction of that. Um. The other part I think was a little uh. It took a little liberty with your listening skills there. But good pick. Nice try, Claire. I want to bring you in what what's your first pick? So mine aren't in the billions like Todd's, but the one that caught my eye most recently, um is Buzz, which is the Van Neck vectors Social Sentiment ETF, and that's the one that made a lot of UM buzz

earlier this month when Dave Portnoy backed it UM. Looking at our data, let me pull it up. They got two d and eighty million dollars on its first day UM, which is just pretty incredible UM for a day launched. Everything that I've been doing recently is comparing back to those UM non transparent funds, because it's been a you know, about one year since those launched UM. And I checked this morning and the largest one of those act of

non transparent funds has two one million. That's the Fidelity blue Chip Growth e t F. And and these are huge names that you know, launched these strategies that we're supposed to be some of the biggest products this year, and yet you see this e t F backed by Dave Portnoy that gets more than than the best AUNT did in a whole year, or about as well UM in just a single day. Yeah, I'll jump in here on that. You're right. I said this would probably get

three million from the Portnoy effect. It completely past that. And it's interesting. Buzz launched four or five years ago and it got no interest. So somebody asked me the day, well, what percentage of the assets do you think is because of port And I'm like, because we saw this before.

The buzz on its own was only able to get a tiny fraction of that volume and assets literally like one percent of it, to be honest, um, And so it really I mean also having the fact that Portnoy is a day trader himself and on Twitter, it's so in line with his very being, and I think this is actually a a smart marketing move as opposed to hiring say some celebrity who doesn't have anything to do

with investing. I think we'll see more of this, And what fascinates me is the fact that you know, if you look under the hood of this E t F, it's not like you know, game stop in a MC some of these like day Trader Darlin's um the top holding is Apple and then Boeing. I mean, it's it's you know, you wonder how much of this is people looking at what's in the E t F versus just

seeing Portnoy in jumping in. Yeah, this has nothing to do with people looking at what's inside the t which which gives me as much frustration as the fact that you said, this has more money than the largest of these semi transparent ets. People are not looking inside it.

But the good thing is they're owning higher quality blueshift companies that will survive as opposed to riding the wave of the latest meme praise, which I think is the concern in general and in an interesting aspect of I think this episode is like, how much of this is

just this raw enthusiasm? Um we have new phenomenons of the port Noise and the Cathy Woods of the world who can really um personalize things, and and people are investing in blind faith without actually recognizing what's inside the the e t f um Athanasios. Can we get your first pick? Yeah, this one's going away from like p billennials. I feel like this is a boomer pick. But all right, so the ticker is t MFC. All right, Motley Full one dread et F. Do you remember that newsletter Motley Full.

I feel like there's something like my parents would read, Like they get like a in the mail, like a newsletter with like pictures and colors on it. All right, so they want they have this really strong following, like a million followers that read this newsletter. And they picked stocks and they say like, yeah, did it in investing or income investing or whatnot. So they launched this et F two years ago. I mean, it's not in the billions, but it's got four hundred million, which I think is

really impressive, um, because it just I don't know. I I just think there's a stigma that like Motley Fools, a little bit more old school, and you look at it right and at the surface, it's just like Apple Microsoft, You're like, I'm paying fifty basis points for this, but it actually has been crushing the SMP five hundred since it launched by like and then I thought, maybe, well it's just house money. They maybe they put their own

money into it. But it's pretty steady flows coming in consistently. Um. I feel like this is a pretty solid This is a good boomer pick because I don't think anyone would have expected this product to be If I mentioned this ticker, you would have said fifty million tops just still probably an initial steed. I think four million is pretty impressive for this product. And where the flow is coming from.

I think it has to be newsletter followers. People that are following this newsletter, they probably are still subscribed to it and like either have an unsubscribed and they're still getting it like that email. Um, but it's it's I feel like this would be like an I just picture like an older investor who still gets their newsletter like their dividend picks, and he said, yeah, I'll buy I'll buy the Motley full et F. Why not you have a newsletter that could be his new strategy to to

to track the boomers. Yeah, Like, I don't even think these news I need to be honest, I don't even think these guys were still publishing. To be honest, I had to go digging really deep into the abyss to find this one. Actually was you were going through the tickers. I was going through my brain of going, I don't know what that one is, um, And then I think this baron is there's need t F. That's Tide two barons also like the barons before. Hold on, let me

look it up. Let's see. Okay, what do you think that has Todd? Don't look. I can't because I'm on recording this with you, but I think it's it's certainly less. I would guess it has a hundred and fifty million. Look at you, man, hundred and thirty five million. Your your e t F Jedi forces are are working well, alright, Eric, round out our first round. What's your first pick? My first pick is i'veall, which is one of the ones I tweeted out. This is uh the IVALL quadratic interest

rate Volatility and Inflation Hedge ETF. So let me read to you. This is the e t F dot com, which has these nice little zagats descriptions of e t s. Here's what it says. It attempts to protect against inflation into hedge yield curve shifts and interest rate volatility using tips and long options evalls. Over the counter options on the US interest rate swap curve are described dada dada. So I know from experience that complexity doesn't really sell an ETFs and so and I met Nancy Davis a

couple of times, heard her pitch it. She's very smart, and I just thought, okay, this might appeal to a certain kind of maybe really high end advisor or institutions. And it's got two point five billion and it's only launched in May, is two years old. That is amazing to me. And it charges basis points that is really on the high set. That's probably top five most expensive for E t F s. So it's complex, expensive and indie.

In a way, it reminds me of ARC, where I was like, there's just so much going against this, and so to have two point five billion, I would have estimated million would be a success for this in two years. So it blew it away. And big reason it blew it away is that if you look at the performance, it's really good. It's got a nice steady rise. And so over the past two years since it came out, I'll give you the performance, So it is up since it came out. Now you'd be like, well, that's not

that much, right, you know, the SMPS up more. True, but this isn't really competing against the SMP. If you look at the aggregate bond E t F it's up nine. And here's what's amazing, i'vall if you want to talk about the SMP, is about a sixth of the volatility. In other words, that is a very low, low, low vault, and that is hot and that's I think why it's

selling so well. Yeah, and I just to add to it, what it's doing is it's owning Schwab tips E t F as its beta and then adding on using options to be able to get extra income and be able to reduce the downside to it. So this is true active management in the e t F rapper by using a core product and then amplifying on top of it, as opposed to you know these content. Nothing wrong with ARC and the concentrated picks, but it's nothing like the SMP five fundred. It's not starting with the SMP five

and then pulling things out or adding to it. This is actually you know doing that. And to credit of Nancy because she's not doesn't have a team of wholesalers that's doing this. This is a true independent provider. Well, it's interesting because she pivoted from her hedge fund to launch this, and we we also saw the first hedge fund to convert itself into an um an e t F. So it's interesting to sort of think about how that

might impact things going forward. If more managers do this kind of thing, I will say, the idea of a fund that helps with inflation, I think we're going to see more of those, I think with the success of this, and also that inflation is the new like scary word out there, and so I think that's this is gonna spark some not not copycats on this strategy exactly, but e t s that are geared towards the inflation situation. Okay, let's dude round to Todd. I'm gonna start with you again.

What's your second pick? Yeah, So I hesitate to offer an I shares product because I shares an under the radar probably doesn't seem like it makes sense. But i q l T, which is the I Shares edge ms c I International Quality Factor e t F has three billion dollars in it um. That's nowhere near as big as it is for the US version of of the factors.

But I've always thought of international investing being primarily done with a blunt instrument of ms c I EFA or m s c I emerging market based products at A shares and Vanguard has and I didn't think anybody was really doing factor rotation or factor exposure, especially something that Eric I'm sure is going to make fun of me for picking another boring blue chip high quality e t F that's out there because it owns it owns Roshan nest Ley in totality an s A P. But you

know what it's beating i EFA and v e A by more than three hundred basis points. So the quality tilt is actually adding value pun unintended for what it is. I just didn't realize anybody was doing this. This is a three billion dollar et F I should has many three billion dollar ets, but I didn't think international factor would have been among them. Listen, quality, large caps, that's it's on brand. I would expect nothing less. I'm happy you brought that, and I'd be honest, I am shocked

it has that much. Usually anything international over the past couple of years hasn't done well because it's lagged. So the idea they can get that much into this is is really amazing. I will say it's thirty basis points. That's a nice advisory low fee for that strategy, and that has to help. I fell asleep halfway through that pick. No, it's a it's a silod pick, uh. I think, you know,

because now there's a rotation more into international. I feel like so instead of people maybe just going straight for IFA, this is a solid pick, you know, and quality might work a little bit better. I think on on an international scale like that, pointing out performs has been good, So this is actually a really it's a really good pick. Okay, clear, let's give you the my quick what's what's your second pick?

So also a bit of an underdog compared to the billions there, but I think this is one of the least boring e t F s UM. I've been looking at at UFO, which is the Procure Space et f UM, and it's still pretty tiny. But I think what's really notable about it is that since Cathy would announce that she's going to be launching a space fund, she announced that back in mid January UM, the fund could come

out any day. Now UFO has more than tripled in assets, so it's still only at a hundred and thirty one million, but you know, it's been trading since April UM and then just in the past what two months, it's uh, it's it's tripled. So I think it's a interesting sign of what may be to come for this fund and for any other space funds. So this is interesting UFO. What a gift it got. And Andrew Chaining has been through a nasty situation with one of his old issuers, and it was I was happy for him to get

this gift. Because UFO hadn't was kind of kind of hanging around in oblivion and then boom this filing from ARC, which just shows you the power of Kathy. I mean, she's almost like Buffett at this point where she buys the stock or talks says the stocks in an interview when it goes up, and it was just it's nice for Andrew. I think some of that money will stick, maybe a couple of leaves for hers, but she's actually helping the whole category. I think we're going to actually

see this become a true investment category. I think spacets there's a there's a little bit out there um from an investment perspective, but I think people are going to then look to see is there another option. Is there a a slightly cheaper or a slightly more index based approach to it, or differentiation? And I think this will be a chance for UFO to have an opportunity to highlight what makes it different than the active management approach,

whereas right now it's it's way under the radars. As you mentioned, Claire hath nasias Um, what other ETF has surprised I almost want to guess I'll tell you, Okay, let's'm gonna I'm gonna let you guess. Uh. I feel like it's I feel like it's a first trust product. Am I right? No? I mean you're good, you know, but I went I went a different a different route. Knew that you were going to guess, and it was like, Eric, okay, okay,

one more try is it one? Is it something that's China? No? Okay, all right, thank you, go ahead over to Okay, pick I pick Bug the Global x Diverse Security TF Soccer. Yeah, so let me tell you why. When you think about it, you like, oh wow, Thematic pick yeah, like it's got

eight hundred million. This is why I think it's actually pretty impressive because you mentioned Andrew Chain and he had hacked first, right, and I think like Hack is like the first like quintessential Thematic ETF that came out, and he had Cyber that came out. They together it was those have got like over five billion. So it's almost like now you can't get into the club. It's like another cyber security ETF Like no, thanks, like it's fine,

but Bug is coming. It's it undercut both Hack and Cyber. It's been performing better than Hack and Cyber. It's more concentrated than Hack and cyber Um, and it's able to raise I think eight hundred million and take away some of the assets from from those guys. The reason where it's grown a little bit is because of all the legal issues around Hack, people were leaving that funds, they were going to cyber and they were dumping into things

like Bug. But it only launched in late two thousand nineteen, so it's still pretty new. So and also I like Bug because I'm a big money black fan the movie and like Bug was like the character, So that's also probably have the reason why I picked that picker. This ETF was on my list. This was my alternating case. Uh, somebody else picked it because for everything that you said, But it actually has gathered almost all of the assets this year despite losing money this year. You don't usually

see that. Obviously, it did very well in in two thousand and twenty, but third mover advantage doesn't usually work unless you know Global Acts is the is the leader in thematic ets for a reason. You know that they're showing their their true colors here. I don't know anybody who's ever feest up to saying that they're a big

fan of men in black. Um, So that's that's especially like certain characters like like normally men and black gets reference with the memory thing um or when you see somebody who's in like an all black suit, but like you like went to a whole another place. I wish Eric and I debate on movies all the time. I liked the movie. I like the ray band, like the whole thing back. I had the CD the soundtrack, so I was really into that movie when I was younger.

It's it's good. The first one is really I thought it was really good. I watched it with my Sunday. Yeah, it's good. Alright. On that note, Eric, we're gonna give you the final words. What's your second pick? So I'll go with one that's again. I just tweeted about this, which is soxel s o x L. This is the direction three times semiconductors. If you had asked me how much does this thing have, I'd say, well, okay, it's a it's not a it's not a sector, it's an industry.

Semis are pretty popular. I'd be like, probably it has four billion, and it just doesn't make any sense to me, especially because if you look at the flows this year. I mean, semiconductors are a fascinating space to me. They're almost like the oil of our tech world. I mean, you have to have semis right there. Just it's such an interesting space. But you get enough juice from the regular one, so a do you really need leverage? But I'm like, Okay, maybe there's some people who need leverage.

But this year this has taken in more money than any of the regular ones like SMH socks or XSD two billion dollars and flows. It charges basis points. And here's the thing. It's not like it's gone on a tear. It's been somewhat of a volatile ride, which is actually bad for leverage. And I just wonder who these people are. And then if you look at the three X bear, it's got almost no assets. So I think a couple

of things are going on here. I think generally traders are just really bullish on semis, and I think they use this as a proxy to play that kind of a balance. And I also think it's representative of the retail crowd because there's a bunch of leverage ETFs that are way bigger than I would ever imagine. T q q Q is another one, although it wasn't a surprise because I tracked this all the time, but that one

now has ten point seven billion dollars. So I do think that some of the leverage ETFs are appealing to the retail trading crowd who likes fast. They don't want to wait around for SMH and a regular e t F. They want the return and three times faster. But anyway, I'm shocked, And this is why the leverage GTF issuers are in a good business. For the amount of assets

they have. They make a lot of money because they all charge then any five BIPs and they have a kind of interesting almost like hardcore local fan base that continues to lose their products, and they don't have fee pressures, so it's just an interesting world to me. And anyway, I was just blown away. I would have thought this was the value. The volume would have been high and would have been among the higher e t F s

given the trading crowd. But people are clearly holding onto this if it's got over four billion in assets, and and that both has high reward but also high risk. As you guys have talked about what these just power tools in prior shows. Yeah, like I we would equate them to a chainsaw. You know, they can do wonders, but you can also lose a hand if you don't

know what you're doing. So I know, I don't. I wonder if people you're right When I look at the leverage ETFs, I want to see like thirty turn over a day, and this one's I don't know. Maybe, So you're right, there's probably be a a little more buying and holding than there should be. These things should be traded, not held. Eric, Can I just say that I'm shocked that you didn't pick Jets. I was positive that was

going to come. So it's a good question. The reason that has more assets than I would have thought two years ago. But I was on that e t F like White on Rice, I tweeted about every day that these are ones where I just forget about them for a while and they come up for some reason and I'm like wow. It's almost like ever go to a friend's house and they have a kid or a dog and you're like, I cannot believe how big your kid is getting or your dog. It's like that, but Jets,

I live with Jets. Jets is like in my household, so I don't notice how big it's getting. You see, know what I'm saying? Like Arc two, same deal, I live with it. I live I live with a kid and a dog that both do that, and I'm just like, oh my god, how much bigger to get? All right? On that note, Todd Claire at the Nasios, thanks so much for joining us on Trailings again. Thanks for having us, Yes, thanks for having us. Thanks for listening to Trillions until

next time. You can find us on the Bloomberg Terminal, Bloomberg dot com, Apple Podcasts, Spotify, and wherever else you like to listen. We'd love to hear from you. We're on Twitter, I'm at Joel Webber Show, He's at Eric fall Tunas. You can find Claire at CFB Underscore eighteen, Todd at Todd c f r A, and Athanacios at t Sarah Vegas. As always, good luck spelling that this episode of Trillions was produced by Magnus and Drison. Francesca Levy is the head of Bloomberg Podcast