Aniket PujariAbout 2,000 asset managers and investment advisors are here at the Exchange ETF conference in Las Vegas. A small ETF crowd arrived Saturday night to see Dead & Co. at the Sphere, who put on an amazing light show on top of an amazing music show. (What did you expect from the Dead?) Musical entertainment aside, this is a gathering of asset managers like Blackrock and Vanguard along with investment advisors who buy the ETFs. The advisors want help in three areas: 1) understanding the recent market chaos, 2) investing strategies using ETFs, and 3) how to more efficiently grow and manage their business. That third area, broadly known as “practice management,” is an Increasingly large part of the focus of these conferences: it will get roughly 35% of the content focus at this conference. That’s because the wealth management business is growing fast, even as it focuses on a smaller group of wealthy investors who have profited from the growth of both real estate and the stock market. ETF flows in 2025: Fixed income is strong It’s often said that “flows follow price,” that is, many investors are largely trend followers who buy what others are buying. ETF flows year to date have been choppy. The main trend is inflows continue into equities, but there have been strong inflows into fixed income, particularly in ultrashort funds. Precious metal funds have seen surprisingly light inflows, given the recent highs in gold. ETF inflows YTD Equity $135 billion Fixed income $92 b Fixed income Ultrashort $40 b Precious metals $8 b Source: ETF Action For equities, the biggest chunk of inflows (about half) remains into passive index funds, a trend that has been going on for many years. Until recently, there has been modest inflows into large cap growth funds like Vanguard Growth Index ETF (VUG). One warning sign for this category: outflows in the last 30 days in Invesco QQQ Trust , a sign some tech momentum investors are getting nervous. More importantly: there are significant inflows into fixed income, almost on a level with equity inflows. This makes sense on two levels: 1) the recent market volatility has driven some to the safe haven of bonds, and 2) the population is getting older. “Investor demographics are another long-term driver of the shift towards bond funds, as investors in or approaching retirement de-risk their portfolios and place a premium on reliable sources of income,” Ben Johnson, head of client solutions at Morningstar told me. Much of the recent bond flow has been going into ultrashort Treasuries, and evaluating those flows is a major focus for the conference. “We think advisors are looking to make sense of the fixed income market and understand how to position client portfolios amid market volatility,” Todd Rosenbluth, head of research at TMX Vettafi, which is running the conference, told me . There are several sessions focused on where asset managers like BondBloxx and F/m see the best opportunities in fixed income. Private equity and private credit in ETF wrapper Getting private credit and private equity into an ETF wrapper is proving tricky. The recent launch of the SPDR SSGA Apollo IG Public & Private Credit ETF (PRIV) was met with only modest demand from investors, but interest in the space still remains high. “There are a lot of industry discussions underway about the SSGA offering and what else might be coming from the industry,” Rosenbluth said. Bondbloxx has previously launched a Private Credit CLO ETF (PCMM) that will be discussed on stage. The takeaway is investors want access to private equity and private credit, but it’s tough to provide in an ETF wrapper. “There’s an important liquidity mismatch,” James Thomas from Ropes & Gray told a panel at the conference. “Getting illiquid asset classes to work in an ETF wrapper can require watering down the stuff that investors want — in this case, exposure to private assets,” Johnson at Morningstar told me. “This is a category where there’s already entrenched leadership and stiff competition in the semi-liquid space where specialist firms like Blackstone, Apollo, and Cliffwater have already made significant headway with non-traded BDCs and interval funds,” Johnson said, referring to business development companies . “These evergreen fund structures don’t have to water down the ‘good’ stuff the way an ETF does and many of them are offered in a wrapper that’s generally still convenient for most investors.” Bottom line: it’s still unclear if ETFs will be the dominant space for trading private capital products. Actively managed ETFs Actively managed ETFs represent less than 10% of the assets of the nearly $11 trillion ETF business in the United States, but they have been punching above their weight for some time. This year, nearly 30% of the total amount of new cash going into ETFs has swung to the active models. Active ETF managers like Cohen and Steers (which recently introduced an actively managed real estate ETF), TCW and T. Rowe Price will be presenting their best active ideas. One active trend worth mentioning: option income and buffer products. Option income products are tapping a desire for funds that provide regular income. The largest ETF in this area, the JP Morgan Equity Premium Income ETF (JEPI), sells covered call options on the S & P 500. This caps some upside potential but also provides a monthly income. Buffered products like the FT Vest Laddered Buffer ETF (BUFR) and the Innovator Defined Wealth Shield ETF (BALT) provide exposure to the S & P 500 up to a limit and provides a buffer against some losses. These products have proven very popular with investors who want to stay in the market but also opt for some downside protection. Leverage/inverse, single-stock bets are hot There is a small but substantial group that enjoy placing outsized bets on the market. Leveraged and inverse ETFs have grown substantially in the last few years, from roughly 2% of ETF assets under management to about 7%. This group was previously hot on leveraged and inverse bets on indexes like the S & P 500 and the Nasdaq-100. Many have since shifted their attention to single stock ETFs that are bets on high volatility tech stocks like Tesla , Coinbase Global , Strategy , Nvidia and even Apple . Leverage/inverse: single-stock bets are hot (YTD flows) Single stock leverage/inverse $6.5 billion Indexed leverage/inverse $607 million Source: ETF Action Most of the holders of these ETFs hold them for only short periods of time (often a day or so), and with good reason: in downtrends the daily reset that is built into these products can produce results that are disastrous in a very short period of time. Single stock ETFs in March Direxion Daily TSLA Bull 2x (TSLL) -33% GraniteShares 2x Long COIN Daily (CONL) -28% Direxion Daily AAPL Bull 2x Shares (AAPU) -20% GraniteShares 1.25x Long Tesla Daily ETF (TSL) -20% ETF share classes of mutual funds Vanguard pioneered this structure, which allows an ETF to be used as a share class within a mutual fund. The ETF structure is more tax efficient because it allows for better management of capital gains. Now that the Vanguard patent has expired, roughly 50 other firms have filed to offer ETF share classes of their mutual funds and are awaiting SEC approval. “This is going to happen fast,” Joe Mannon from Vedder Price told a panel at the conference on Sunday. “I could see the SEC going light speed on this.” Ben Johnson at Morningstar agrees. “I think that SEC approval is a matter of when and not if,” he told me. “Tacking ETF shares onto existing mutual funds has the potential to benefit all fund shareholders, and it is also a structure that’s been successful for all involved in other markets outside the U.S., like Canada.”
