Speaker 1: Welcome to Trilliance. I'm Joel Webber and I'm Eric bellionis Eric.
Speaker 1: We haven't spent that much time talking about trends year
Speaker 1: to date, right, and that's something I do a lot.
Speaker 1: And the rest of my job here is to track
Speaker 1: the flows. The flows. It's every year. It's almost like
Speaker 1: a horse race, you know, it's year to date flows.
Speaker 1: So now we're in June and we've got an update
Speaker 1: on the horse race. Where a basketball game. I gotta
Speaker 1: be honest with you, it's half time, Okay, give me
Speaker 1: a bird's eye view. What's happened in the first half.
Speaker 1: So this was not a normal year. Last year everything
Speaker 1: was like utopia. Everything was going up, namely US equities.
Speaker 1: This year was everything that was going up together, which
Speaker 1: is also unusual. So et s were just exploded. Four
Speaker 1: hundred and eighty six billion in flows. Last year, everything
Speaker 1: took in money practically. This year was much harder. Now
Speaker 1: e t f s up to this point of taking
Speaker 1: in a hundred and twenty seven billion dollars now this
Speaker 1: time last year they had taken in almost two billion.
Speaker 1: Now keep in mind, yes they're underperforming, but it's a
Speaker 1: rougher market. And if you look, active mutual funds are negative,
Speaker 1: not by a lot, but they haven't taken in any money.
Speaker 1: So a hundred seven billion in this environment, it's pretty good.
Speaker 1: And unlike last year where it was all US equities
Speaker 1: leading the way as usual, especially after since Trump, when
Speaker 1: it's been a US equity flow athon US equities were
Speaker 1: working on. That sounds fun, doesn't it. Yeah, you know,
Speaker 1: I like a basketball game better, but okay, But something
Speaker 1: magical happened in early May that sort of put us
Speaker 1: back on a type US equity flow athon which was
Speaker 1: lacking the rest of the year. Do you know what
Speaker 1: happened in early May? That sort of completely changed the
Speaker 1: directory of flows away from say begging a fixed income
Speaker 1: kind of year to being much more of a US
Speaker 1: equity kind of year like last year. What happened? I
Speaker 1: am racking my brain to remember early May, and you're
Speaker 1: just gonna have to help me out. Two words. Warren
Speaker 1: buff It h were Buffet. I've only seen two people
Speaker 1: have the ability to single handedly change the trajection questions.
Speaker 1: We could have just done the whole episode twenty questions.
Speaker 1: The first is the fed chair whoever that is when
Speaker 1: when they talk the flows changed? Happened already next Trump,
Speaker 1: Trump is able to move flows pretty regularly. Buffett did it.
Speaker 1: What he did is he came out and he said
Speaker 1: he was buying I think it was seventy million shares
Speaker 1: worth of Apple, which was adding to more of his
Speaker 1: Apple holdings. And it was over that weekend of the
Speaker 1: Berkshire Annual Meeting, and I guess it was the spiritual
Speaker 1: lift the market needed. Plus you had Apple doing buy
Speaker 1: back just before that, so that really got people going.
Speaker 1: And since then there's been a nice rally and US
Speaker 1: equity e t F s have taken in a lot
Speaker 1: more and sort of made up for lost ground earlier
Speaker 1: in the year. But anyway, that kind of brings us
Speaker 1: up to where we're at right now, which is a
Speaker 1: little less Linn last year, but the assets are more
Speaker 1: spread around after I Leffett, and so we're gonna drill
Speaker 1: into that this episode and actually look at where the
Speaker 1: flows and outflows have come from and joining us again.
Speaker 1: One of our favorite episodes, we had a guest named
Speaker 1: Todd Rosenbluth who's the director of mutual fund and E
Speaker 1: t F Research at the cf are A. Todd is
Speaker 1: back for this episode. Yeah, Joel instead of Ted too.
Speaker 1: This is like Todd to there's nobody better to pick
Speaker 1: apart first half flows than than Todd. He is a
Speaker 1: bona fide e t f nerd this week on Joyance
Speaker 1: Halftime with Todd Rosen Booths. All right, Eric, I'm looking
Speaker 1: at a bunch of pronounce First, we're gonna talk about inflows.
Speaker 1: Second we're going to talk about outflows. Thurd, we're gonna
Speaker 1: talk about performance inflows. What do you notice? Right? So
Speaker 1: I'll just throw out the top inflow leader of the
Speaker 1: year is a ticker I E f A, which is
Speaker 1: the I shares Core M s C i EFA E
Speaker 1: T f IFA is essentially an acronym that we know
Speaker 1: that's international developed markets, so mainly it's Europe and japp
Speaker 1: hand and that has taken in seventeen billion dollars, and
Speaker 1: keep in mind that is at increase on assets. So
Speaker 1: i f A is far and away the flow leader.
Speaker 1: The next one on the list is seven billion. But
Speaker 1: let's focus on I f A. Todd, what's your take?
Speaker 1: What is driving all of the traffic here? Yeah? I
Speaker 1: think it's a couple of things. One is that in
Speaker 1: prior years investors were under exposed to develop internationally were
Speaker 1: favoring US equities. It was a very home biased for
Speaker 1: US investors, and so international equities did relatively well last year.
Speaker 1: Investors wanted to rotate and make sure they had exposure
Speaker 1: to it. The second thing is investors are as we'll
Speaker 1: see with the rest of the flows, Investors are increasingly
Speaker 1: looking at lower cost products. So while I e f
Speaker 1: A was by far the biggest gainer of new money,
Speaker 1: a companion product that's more expensive from I shares e
Speaker 1: f A, which has a higher expense ratio largely similar
Speaker 1: portfolio was the second biggest and outflows. But you can
Speaker 1: still see a big different about a ten billion dollar
Speaker 1: difference net inflows between those two products. So there is
Speaker 1: still demand for developed international investing this year. Just to
Speaker 1: explain that price differential, e f A is point three
Speaker 1: t I f A is point oh eight, So doing
Speaker 1: the math there, that's four times cheaper. That's a That's enough.
Speaker 1: And what was interesting about this this year we saw
Speaker 1: a five billion dollar trade, actually five point six billion
Speaker 1: out of e f A into I f A, so
Speaker 1: almost a third of that seventeen was one trade. I
Speaker 1: believe it was Merrill Lynch's model portfolios. They put all
Speaker 1: the f a's in and they basically were able to
Speaker 1: move that much money in the course of two or
Speaker 1: three days. It was, as far as we know, the
Speaker 1: largest et F trade on record, and that was just
Speaker 1: because even the big fish wont it cheaper if they can,
Speaker 1: and I f A had started to gain enough liquidity
Speaker 1: over the years that it became formidable for someone big
Speaker 1: to use it, Whereas before when it first came out,
Speaker 1: even though it was cheap, it wasn't liquid enough for
Speaker 1: the big guys. But now this thing is trading about
Speaker 1: a billion a day, which is almost good enough for anybody. Yeah,
Speaker 1: and I think it's similar. You know what's number two
Speaker 1: on the list of inflows is I E M G,
Speaker 1: which is another low cost product from I Shares. It's
Speaker 1: a cheaper version of E E M they're more incumbent
Speaker 1: emerging market product. You've got a slight difference and exposure.
Speaker 1: The core series of products from I Shares has some
Speaker 1: small and MidCap exposure, but these still are market cap weighted,
Speaker 1: So the largest companies nest Lee for example, in I
Speaker 1: E f A and Samsung for example in I E
Speaker 1: M G are still the same large companies in the
Speaker 1: cheaper and the more expensive products. And I'm noticing another trend,
Speaker 1: which is number three I v V also I shares right, so,
Speaker 1: and actually number four s h V also I shares,
Speaker 1: So I would put before we get to s h
Speaker 1: V because that one's unique I VV. If you look
Speaker 1: at the flows for last year, the top three were
Speaker 1: the same I F A, I M G I V
Speaker 1: V A slightly different order. But this is what we
Speaker 1: talked about a couple of weeks ago with Martin Small,
Speaker 1: what I call the four headed monster. These are dirt
Speaker 1: cheap ETFs that make up each a big slug of
Speaker 1: your portfolio. You throw a G G in there, which
Speaker 1: is your U S aggregate bond. That is number six
Speaker 1: on the list. Those four E t f s are
Speaker 1: taking in a third to all the money because you
Speaker 1: get an entire portfolio for six seven basis points all in.
Speaker 1: But let's look at v A. V A is a
Speaker 1: competing product on there. V A would be a competitor
Speaker 1: to I E F A, and that's number six. Yeah.
Speaker 1: So again, like what I was saying, some people are
Speaker 1: rotating to international. What's the difference between I F A
Speaker 1: and V A. If you were advising somebody which one
Speaker 1: to pick and what they should think about because they're
Speaker 1: both cheap, right, they're both cheap, so you can't. Investors
Speaker 1: just need to be mindful if you want to use
Speaker 1: I Shares and Vanguard together. Is the way that the
Speaker 1: index behind this is going to be different. So VA
Speaker 1: tracks and index that's offered more that's available from Foots,
Speaker 1: your Russell Foots, your Russell h includes and developed markets
Speaker 1: Canada as well as South Korea as part of the portfolio.
Speaker 1: Canada is not part of I e f A. The
Speaker 1: IFA part doesn't include a C in that there's no
Speaker 1: it's not KIFA so to speak, so there's gonna be
Speaker 1: no Canadian exposure and South Korea is considered an emerging
Speaker 1: market according to M S c I And at the
Speaker 1: risk of getting too far in the weeds, if you
Speaker 1: use one I Shares product and one Vanguard product that's
Speaker 1: from this list here, you could either be doubling down
Speaker 1: your exposure in certain countries or you could be having
Speaker 1: a whole in certain countries, depending upon how you structure that.
Speaker 1: Maybe based on the indicas bottom line, you should use
Speaker 1: them as a set right if you go I f A,
Speaker 1: you should also do i MG. If you go V
Speaker 1: E A, you should use V W O and not
Speaker 1: mix and match in that case, or do so with
Speaker 1: a full awareness that you're doubling down. So if you
Speaker 1: really like South Korea, for example, and you want exposure
Speaker 1: to it, that's the way of doing it. Or you
Speaker 1: want to really think that Canada is a part of it,
Speaker 1: than than Yes, But certainly going into buying an ETF
Speaker 1: not just because it's the cheapest one, because a lot
Speaker 1: of the ones that are on the top gainers this
Speaker 1: year or a top asset gatherers this year are cheap,
Speaker 1: but they're not the same products. It's not just one
Speaker 1: basis point cheaper than any other. So I mean cheapness
Speaker 1: is a trend. Um. There's also some tickers that are
Speaker 1: sort of boring s h V. Yes, so s h
Speaker 1: V is um fascinating. It's never on the top ten.
Speaker 1: This is the I share a short treasury bondy t
Speaker 1: F which holds treasuries that are really short term. It's
Speaker 1: almost like a money market funder or like putting your
Speaker 1: money under a mattress or cash and for it to
Speaker 1: take in you know, what is it six point two billion?
Speaker 1: That's a seventy eight percent increase in its assets. And
Speaker 1: this brings us to on there well earlier in the air.
Speaker 1: Remember when volatility is going crazy, everybody when they get
Speaker 1: scared that this is the kind of stuff they run
Speaker 1: to so they put it under the mattress, and they
Speaker 1: didn't take it up right. And so ultra short term
Speaker 1: and short term debt ETFs all told talking about twenty
Speaker 1: four billion, which is way punching above their weight because
Speaker 1: is they only make up one percent of the assets.
Speaker 1: What's your take on that? You think that money is
Speaker 1: gonna come back out, Todd if the market continues to rally.
Speaker 1: I think part of that's in there in part because
Speaker 1: the Federal Reserve is raising interest rates and has on
Speaker 1: a path to continue to raise interest rates further. And
Speaker 1: so short term and ultra short term products aren't gonna
Speaker 1: go down. You know when when the usually bonds go
Speaker 1: down in value and bond ETFs go down in value
Speaker 1: as rates spike higher, this is a flight to safety
Speaker 1: and a flight to liquidity. I don't think it's parking there.
Speaker 1: I do think there's there's money that's gonna stay in
Speaker 1: there for a period of time, and it's you know,
Speaker 1: SHV is one of them, but we're seeing floating rate
Speaker 1: bond products. I think f l O T S is
Speaker 1: one of the top ones as well. But you're actually
Speaker 1: we're seeing it from various products. You know. JP Morgan
Speaker 1: has a product jps T as an example, that just
Speaker 1: launched late last year, and I think it's already above
Speaker 1: five million in assets already based on net inflows. There's
Speaker 1: a lot of demand that's out there for short term products.
Speaker 1: I think that's going to continue as we move it
Speaker 1: to the second half of this game. So it's a
Speaker 1: little bit like how Eric uses jacuzzi where you just
Speaker 1: like get in, relax a little bit, and then get
Speaker 1: back in the game. Well to some I think some
Speaker 1: you know, some of the money that rotates is gonna stick.
Speaker 1: Those people are just going to hang in the jacuzzi
Speaker 1: and until they get all wrinkled and whatnot, and then
Speaker 1: you gotta get out. Yeah, other people are gonna get out.
Speaker 1: This top ten list is a good mix and of
Speaker 1: of products that tend to cater to both the sort
Speaker 1: of quick hit types and also the more long term
Speaker 1: But SHV and s h Y or two products that
Speaker 1: you see have grown over the last five years. So yes,
Speaker 1: it's a quick hit this year, but they've steadily grown
Speaker 1: and I think they're actually replacing other vehicles that people
Speaker 1: use back in the day. Four places to park cash
Speaker 1: or hideout from rates. Yeah, I mean some money markets
Speaker 1: obviously are a place where people have hidden out. And
Speaker 1: you know, we were obviously talking about this on an
Speaker 1: E t F show, but money is moving from et
Speaker 1: or into e t F s from from utualer than that.
Speaker 1: It's a cultural phenomenon. This show definitely is. But because
Speaker 1: you know, if rachel going up and if the returns
Speaker 1: are gonna be lower, you want to pay as little
Speaker 1: as possible. And so these products ETFs in general, or
Speaker 1: bond ETFs tend to be significantly cheaper than actively managed
Speaker 1: mutual funds. And so if if the returns are gonna
Speaker 1: be relatively muted, you want to pay as little as possible.
Speaker 1: So number UH six is agg which I think we've
Speaker 1: hit on with what we've been talking about with bonds
Speaker 1: UH number seven float fl LT also bonds UH number
Speaker 1: nine momentum m t u M. That's a shocker. Why well,
Speaker 1: because it's it's kind of hasn't come from oblivion per se,
Speaker 1: but it only had about, you know, a couple of
Speaker 1: billion last year. Now it's taken in, it's basically doubled
Speaker 1: in size in the past um six or seven months.
Speaker 1: And this hasn't been the most exciting year for stock,
Speaker 1: so it is interesting that momentum would be that high
Speaker 1: on the list. Yeah, A couple of things. One, what
Speaker 1: we've seen this year is that the winners of last
Speaker 1: year in many cases have continued to move higher. And
Speaker 1: this is basically a let your winners run approach. The
Speaker 1: socks that get in have performed relatively well and have
Speaker 1: strong relative strength and strong technical metrics from a momentum perspective,
Speaker 1: and so that's TECH. Where that was Tech at the
Speaker 1: end of the year, and Tech has done relatively well,
Speaker 1: which explains number ten, Which explains number ten as well. Uh.
Speaker 1: The second thing is we at c F r A
Speaker 1: we do individual research on on e t F fourteen
Speaker 1: hundred in total. We decided to write about M t
Speaker 1: U M for the month of June as our focus
Speaker 1: et F and we did so because we were pleasantly
Speaker 1: surprised that despite the strong run for many of the
Speaker 1: socks inside the portfolio, we still our analysts still felt
Speaker 1: they were many of them were still undervalued. Some of
Speaker 1: those are bank companies, some of them in the financial sector.
Speaker 1: Summer technology stocks like Cisco and Intel, and I believe
Speaker 1: it actually just rebalanced UM and I saw one of
Speaker 1: your members of the team here posted on Twitter in
Speaker 1: June just examples of stocks that made it in additional
Speaker 1: technology stocks have rotated and this is not unlike the
Speaker 1: agg or i VV products. This does rotate and rebalance
Speaker 1: every six months, and so it's something for investors to
Speaker 1: be top of the top of mind. Yeah, I'm looking
Speaker 1: right now MTUM. The tech waiting is so you're getting
Speaker 1: a lot of tech here. Okay, So there's there's some
Speaker 1: some themes that I noticed, cheapness being one, tech being another,
Speaker 1: the things that did well last year. What do you go?
Speaker 1: How do you guys feel about this top ten for influence.
Speaker 1: I'm not surprised to see. I think many of the
Speaker 1: names are what you would expect in the market, which
Speaker 1: has been expectations of of bonds declining and value, so
Speaker 1: investors hiding out in that and then continue demand for
Speaker 1: international investing. I think the fact that we have a
Speaker 1: single factor product m t UM and we have net
Speaker 1: inflows for the triple queues, which is often seen net outflows.
Speaker 1: It's been around for a while, but his money has
Speaker 1: flowed out of it over time. I think it's encouraging
Speaker 1: that there's still adoption of e t f s to
Speaker 1: be had. And I also think that this top ten list,
Speaker 1: when the market's a little shaky a lot of times,
Speaker 1: that will clear off some of the crazy hot trends.
Speaker 1: I think MTUM is one example where that that does,
Speaker 1: and the cues uh and what it will leave with
Speaker 1: is the huge secular shift from like high cost mutual
Speaker 1: funds into low cost ttfs. A lot of this money
Speaker 1: was going to come over no matter what was going on,
Speaker 1: So I think this is like a baseline that you
Speaker 1: can expect to see for a while. I think half
Speaker 1: these e t f s, maybe even six of them,
Speaker 1: are probably gonna be on the top ten list for
Speaker 1: a long time. It's the floating rate debt e t
Speaker 1: F the momentum which I think will come and go. Look,
Speaker 1: you gotta I shares in Vanguard are just so dominant.
Speaker 1: The cues on there is Investco. But outside of that,
Speaker 1: I mean, I haven't gone down to the top twenty five,
Speaker 1: but you're probably looking at four of the top twenty
Speaker 1: five or two companies. And I bet if you look
Speaker 1: at the flows in the first or I did this
Speaker 1: when there was volatility. Still of the money goes to
Speaker 1: products that charge less than twenty basis points. So even
Speaker 1: with its volatile or it's utopia, there's nothing like dirt cheap. Okay.
Speaker 1: So we talked about inflows. Part two, Let's talk about outflows.
Speaker 1: Number one. This is a shocker spy also known as spiders,
Speaker 1: also known as the first ETF. I can keep going
Speaker 1: well when you're the largest HEATF, you know that you
Speaker 1: can obviously gain as as the pie continues to expand,
Speaker 1: or when there's a lower cost alternative, as there is.
Speaker 1: You know there's two of them actually I VV and
Speaker 1: v O that are on the top ten list. Some
Speaker 1: of that money that's going into those respected products are
Speaker 1: coming out of spy spy and then spy tends to
Speaker 1: be used more by from a trading perspective, institutional investors
Speaker 1: that are trying to position ahead of something or using
Speaker 1: it as a hedging vehicle. So it tends to either
Speaker 1: be the biggest from an inflows or tends to be
Speaker 1: the biggest from an outflows perspective year after year just
Speaker 1: because of its scale. Yeah, I agree, Spies got a
Speaker 1: crosshairs on it. I VV in particular is going after Spies.
Speaker 1: It's a little cheaper, right, spies point o nine percent
Speaker 1: i vvs point four pc IVV starting to trade a
Speaker 1: little more. Uh, they're gonna be going back and forth
Speaker 1: for a while. One thing about Spy though, is in
Speaker 1: the first month January was a killer month before the
Speaker 1: vall came, Spy took in nineteen billion in a month
Speaker 1: and that was like, uh, almost of the whole months flows.
Speaker 1: So it's sort of like when Spy is on, it
Speaker 1: carries a lot of the weight, and when Spy goes away,
Speaker 1: when the hot money pulls out, what you find is
Speaker 1: Spy had nineteen billion and outflows the next month. So
Speaker 1: Spy we'll see flows in a day that would be
Speaker 1: like a lifetime for other ETFs. So a lot of
Speaker 1: the Spy volume and flows our money coming in and
Speaker 1: out using spin inst the futures. But there is this
Speaker 1: sort of secular shift away inside baseball of I v
Speaker 1: V and VU sort of maybe chipping away at spies
Speaker 1: long term holders. Yeah, because some of the products we
Speaker 1: talked about it in the first segment, I guess the
Speaker 1: first quarter of this segment to use the basketball analogy,
Speaker 1: even though it's okay, I don't know. Is that a
Speaker 1: cricket game. I don't know. I'm an American, I don't
Speaker 1: real cricket. Sorry about that. It's a great mystery. But
Speaker 1: what we saw is, you know, the difference between the
Speaker 1: Eye Shares International and the Vanguard and National. There are
Speaker 1: differences the VOO product, I, VV and SPY all hold
Speaker 1: the same exact stocks within the SMP five hundred. They
Speaker 1: all trade quite well. They all have significant volume behind
Speaker 1: it and type bit esque spreads, so you're really not
Speaker 1: getting the difference and needing to go into the weeds
Speaker 1: and understand what's inside it. People are buying the cheaper product.
Speaker 1: So number two is e f A. We talked about
Speaker 1: that one in the first segment. Number three l q D.
Speaker 1: What's that. L q D is the famous investment Great
Speaker 1: corporate bond d t F four billion, four point five
Speaker 1: billion and outflows. That's eleven organic negative growth there. Here's
Speaker 1: the thing is a lot of people don't realize that
Speaker 1: how big the duration is on l q T. It's
Speaker 1: a like seven years, eight years, meaning that it's very
Speaker 1: sensitive to interest rate. So I think the FED is
Speaker 1: why you saw some money come out of l q D.
Speaker 1: I don't know if Toddy, you've beenything to add. Yeah,
Speaker 1: I think what we saw is that the short term
Speaker 1: bond products for much of the year, in both investment
Speaker 1: grade and high yield, which we'll get to, took some
Speaker 1: of that share as investors were rotating to reduce the
Speaker 1: interest rate risk. So it's again important to not just
Speaker 1: look at the expense ratio with the liquidity of THETF,
Speaker 1: but looking at the interest rate sensitivity that a product provides.
Speaker 1: Also Number four I w D Number five easy you
Speaker 1: both I shares. The first one the I shares Russell
Speaker 1: one thousand value et F. Second ones I shares MSc
Speaker 1: I Eurozone ETF. So both I shares. What do you
Speaker 1: guys seeing these two? Yeah, I mean the Russell one
Speaker 1: thousand series. You know, the growth and the value are
Speaker 1: relatively expensive compared to other products that are out there
Speaker 1: that are either tied to the SMP five hundred that
Speaker 1: that I shares offers, or relative to vanguards lineup of
Speaker 1: growth versus values. I think there's more of an incumbent
Speaker 1: base that money is moving out of it. Values underperformed
Speaker 1: or you know, this year relative to growth. So I
Speaker 1: think that may play apart as well as people have.
Speaker 1: We talked about earlier about momentum and and the triple
Speaker 1: queues are much more growth oriented. Value is going to
Speaker 1: have more exposure to energy and financials. Yeah, just to
Speaker 1: give you some numbers here, I W D which is
Speaker 1: the one with the outflows, is basically down one percent.
Speaker 1: It's sort of sister product that's the growth version is
Speaker 1: up eight point two. That there you have it. I mean,
Speaker 1: that's really the story there. Another thing I noticed about
Speaker 1: the easy you it's a europe product, right, and we
Speaker 1: have another Europe product a little bit lower on the list,
Speaker 1: which is number ten for redemptions. What's the difference between
Speaker 1: those two? Yes, I mean H E D J, which
Speaker 1: is the Wisdom Tree Europe hedge product is I think
Speaker 1: poorly named. It's not just Europe, it's actually the your
Speaker 1: zone for what it is, so it's dominant. Has a
Speaker 1: pet peeve about this, well, I just think you should.
Speaker 1: You should know what's inside. It doesn't have UK, it
Speaker 1: doesn't have UK, doesn't have switchholand which is trying to
Speaker 1: get out of the out of the youth. So yeah,
Speaker 1: but they don't. They're not out, they're not ahead of
Speaker 1: they're not out of Europe. You know, they're still in
Speaker 1: the continent as this though. It's a great surfboard. Oh right.
Speaker 1: The currency hedge dtfs I did refer to them as
Speaker 1: the central bank surfboards, so H E d J would
Speaker 1: basically neutralize the currency and go along the stocks. And
Speaker 1: when the central bank was you know, keeping rates low
Speaker 1: and printing money, it was a great way to play.
Speaker 1: That was it a longboard or sort of a short board.
Speaker 1: This is a long board because all you have to
Speaker 1: do is get on that puppy and just ride it
Speaker 1: like there was. You don't have to be like you know,
Speaker 1: Kelly Slater doing all the crazy moves. It didn't require
Speaker 1: that much trading, but it ended and now you have
Speaker 1: Europeans down is down in general, but the hedge is
Speaker 1: even down worse. You got to keep mind. Currency hedge
Speaker 1: gtf s were a phenomenon. They were like the hula
Speaker 1: hoop of E T s. A couple of years ago.
Speaker 1: They ruled the top ten list. In fact, a couple
Speaker 1: of years ago and Todd you know, you see if
Speaker 1: you agree with me on this. D x J was
Speaker 1: the number one E t F and flows. I don't
Speaker 1: think we'll ever see a non vanguard or our shares
Speaker 1: on the top of the list again. But that's how
Speaker 1: that was only three years ago for first over d
Speaker 1: x J, and I think the year after that h
Speaker 1: G d J might have been one or two. It
Speaker 1: was an amazing situation going on. Everybody was getting in
Speaker 1: on that, and that trade has sort of like unwound
Speaker 1: big time. And but it's been a slow bleed of
Speaker 1: assets because it's a couple it's been a couple of years,
Speaker 1: and we see both d x J and h G
Speaker 1: d J here and what we're not doing a program
Speaker 1: that's about the fun closures this year, but a lot
Speaker 1: of currency hedge E t F s that came out
Speaker 1: in that wave or following that wave have now shut down.
Speaker 1: His money never flowed in to current heads international products,
Speaker 1: so I think it is a long tail for some
Speaker 1: of these products. But one more point on that um.
Speaker 1: Only half the money that went into currency gtfs has
Speaker 1: come out. And I've seen this all Every time there's
Speaker 1: a huge trend, usually half the money sticks. People either
Speaker 1: bought the story forgot they bought it or they're hanging
Speaker 1: in there. And I think the currency hedged wave taught
Speaker 1: people that they have a lot of dollar exposure and
Speaker 1: maybe they do want half of their international hedged. Do
Speaker 1: you think todd that half of your international exposure, whether
Speaker 1: it's e M or it developed, should be hedged or
Speaker 1: should you try to trade around it? Yeah, I think
Speaker 1: it's gonna come down to do you understand the risk
Speaker 1: that's out there? So so some people will want to
Speaker 1: have it. You can do it from a pure currency
Speaker 1: hedge perspective, and the I Shares suite of products and
Speaker 1: the DWS the formerly Deutsche Bank products do a currency
Speaker 1: hedge on that. The Wisdom Tree ones do a double
Speaker 1: down on the currency hedge because or the currency impact,
Speaker 1: because there's exposure to not just reducing the euro or
Speaker 1: the or the end. But these are the companies inside
Speaker 1: it are significant exporters, so the revenues are coming from
Speaker 1: outside of Europe in the case of the European product
Speaker 1: and outside of Japan in the case of the Japanese product.
Speaker 1: So I think that's I think there's a role for
Speaker 1: these in in someone's portfolio, but you have to be
Speaker 1: aware that that trend is gonna go against you just
Speaker 1: as much as it's gonna go for you. Okay, So
Speaker 1: number six on the list j n K junk. I
Speaker 1: think that's kind of funny because when we're talking about
Speaker 1: inflows bonds everywhere talk about outflows different type of bonds
Speaker 1: in massive flight. Well, yeah, j n K, I think
Speaker 1: is much more like an equity. UM. It's also got
Speaker 1: a duration of I think four or five years, which
Speaker 1: isn't as bad as l q D, meaning that it
Speaker 1: has got some rate risk. But ultimately, I think high
Speaker 1: yield just got hurt in the sell off of from equities.
Speaker 1: And because you did see some flows into UM the
Speaker 1: cheaper junk bond e t F h y LB, which
Speaker 1: is the Deutsche Bank low cost So even the junk
Speaker 1: bond space, you do see this sort of hot monny
Speaker 1: moving around to where performances, but you see the secular
Speaker 1: change out of H y G and j n K
Speaker 1: into the cheaper h y LB, which is twenty basis
Speaker 1: points of their forty. So j n K I think
Speaker 1: got hit by two things at once, being a little
Speaker 1: pricey and by just people wanting out of junk because uh,
Speaker 1: there was more of a risk off trade, especially for
Speaker 1: the first three months. Yeah, in relation to J and
Speaker 1: K versus the short term and floating rate bond products
Speaker 1: are are significant ends of the of the spectrum on it,
Speaker 1: so you're you're taking on much more risk from a
Speaker 1: credit perspective. UH investors favored much more of the reducing
Speaker 1: the duration the interest rate sensitivity of the portfolio in
Speaker 1: the first half of two thousand and eighteen. Was h
Speaker 1: y G, which is number nine in the list, affected
Speaker 1: by that double whammy as well. Totally both of them
Speaker 1: J n K, H y G kind of sort of
Speaker 1: mirror each other, right, Yeah, they're like, um, they're brothers
Speaker 1: who don't like each other. Yeah. Yeah, they a few
Speaker 1: I shares, always trashing jan K and vice versa. But
Speaker 1: they tend to their flows move very much similar. I
Speaker 1: think h y G is this sort of bigger, more
Speaker 1: popular product, but they're both, Um, it's not surprising they're
Speaker 1: both on the list with the outflows. That's what made
Speaker 1: h y L B s inflow so interesting, which was
Speaker 1: that they you know, this cheap high yell, but bondy
Speaker 1: t F took in a billion. That just goes to
Speaker 1: show you that some people are still allocating and that's
Speaker 1: what makes all flows tough to read, is because you've
Speaker 1: got people trading and you've got people allocating, and allocating
Speaker 1: typically is more immune from what's going on in the market.
Speaker 1: So we're trying to suss out long term investment. Absolutely,
Speaker 1: So I think both J and K and H y
Speaker 1: G are not used that much by allocators, So that
Speaker 1: reflects trading trends. Uh. Okay, So number seven d x
Speaker 1: J We're gonna skip that one because we've talked about
Speaker 1: it with the head stuff. Number eight, this one's surprising
Speaker 1: to me. A Vanguard real Estate et F v n Q.
Speaker 1: Why is that on the list? Well, v n Q
Speaker 1: saw two point five billion outflows, and um, this is
Speaker 1: a rate story. Basically, people rushed into reats, which are
Speaker 1: passed through securities, which yields six percent five percent. So
Speaker 1: when you can get you know, three percent in a
Speaker 1: ten year treasury, it makes that a lot less appealing,
Speaker 1: not from everybody, but certainly some people that holds reets
Speaker 1: and yields five or six percent. It was being used
Speaker 1: as a surrogate place for income. In fact, what's interesting
Speaker 1: is if you look at sectors, everybody's shocked to hear
Speaker 1: this the sector with the most assets is real estate,
Speaker 1: not tech or energy or anything like that. Because this
Speaker 1: low rate environment, everybody needed yield, and reets was a
Speaker 1: huge one thing that was reliable, right right, So this
Speaker 1: is a little bit of an unwinding of what we
Speaker 1: many called the thirst for yield trade because it had
Speaker 1: more yield than a bond. Oh a lot. Yeah, I
Speaker 1: was yielding more than a junk bond. And you've seen that.
Speaker 1: It's not on the list, But consumer staples, which is
Speaker 1: another defensive sector I think had significant as collectively had
Speaker 1: significant outflows in the first half of the year. Also,
Speaker 1: it's interesting also just to point out, is that V
Speaker 1: and Q has been changing. The index that's behind it
Speaker 1: UH is changing, and so it actually has added in
Speaker 1: some specialty read companies American Tower, Crown Castle, some more
Speaker 1: growth oriented companies, and that may not be as appealing
Speaker 1: for some investors that wanted the defensive, more traditional read exposure.
Speaker 1: No idea if anyone's actually selling because of it, but
Speaker 1: there is a change behind this that investors that may
Speaker 1: be considering V and Q may want to be be
Speaker 1: aware of. Closing thought about these outflows, well, my closing
Speaker 1: thought is this significantly more money going into the inflows
Speaker 1: the money that's going out of the outflows. So we
Speaker 1: still are seeing a very good year behind it, but
Speaker 1: it is still a it's a trade towards lower cost products,
Speaker 1: and it's been more defensive oriented fixed income products that
Speaker 1: really shined in the first half, and taking on credit
Speaker 1: or interest rate risk through fixed income hasn't been rewarding
Speaker 1: investors this year, and money is flowing out as well. Yeah,
Speaker 1: if you look at the top ten, I mean I
Speaker 1: read it as again, uh, a migration for high cost
Speaker 1: to low cost as well as just this rising rate
Speaker 1: environment that those are the two big I think us
Speaker 1: straws that are stirring the drink. Okay, so we've talked
Speaker 1: about influence, we've talked about outflows. Let's talk about some
Speaker 1: of the top performing e t f s year to date. Right,
Speaker 1: we've had a lot of tickers, a little bit like
Speaker 1: alphabet soup. We're gonna have a few more yet, and
Speaker 1: we're not going to look at leveraged or fixed vixed products. Right, Yeah,
Speaker 1: that's not really that's sort of like um counting. It's
Speaker 1: like they're using steroids. We just want to look at
Speaker 1: the natural long only kind of stuff that did it
Speaker 1: the real way, whereas fixed and leverage they can go up,
Speaker 1: they're usually gonna be at the top, in the bottom
Speaker 1: of the list, right, no muscle creams, Okay, we want
Speaker 1: Roger Marris, not Barry Bonds. So based on what we're
Speaker 1: looking at, P s c H is top performing e
Speaker 1: t F here today up twenty nine. I had to
Speaker 1: look it up. These are two kers that I don't
Speaker 1: have memorized. And you know, usually even in the long
Speaker 1: only area, if it's gonna be the top of list,
Speaker 1: it's probably something very specific and maybe concentrated. This is
Speaker 1: power shares S and P small cap healthcare and looks
Speaker 1: like it's getting some kick from biotech, it's getting some
Speaker 1: kick from UM having small caps that they've been doing
Speaker 1: better this year, but ultimately it's doing a lot better
Speaker 1: than both of those. So it's got some stock picking
Speaker 1: probably help here by just owning some stocks that have
Speaker 1: gone up. Maybe there's been a few acquisitions in there,
Speaker 1: but ultimately this is sort of like a lottery ticket
Speaker 1: coming in. Todd, did you know that one? I did
Speaker 1: know that one of the small cap sector products I
Speaker 1: think are quite interesting that make you better analysts than
Speaker 1: Eric it means I knew the one that one on
Speaker 1: the list will be some others on the list. I
Speaker 1: had to look at myself because some of these are
Speaker 1: are few and far between on this. But he's just
Speaker 1: trying to draw drive a wedge between us where wants
Speaker 1: to see some fireworks. It's fine. There's only a handful
Speaker 1: of et F analysts that will talk on just about
Speaker 1: any topic. And Eric and I found and you found
Speaker 1: two of them in the room, and you haven't locked
Speaker 1: the door. So small cap healthcare, you've got a couple
Speaker 1: of things that are working out. Their small caps are
Speaker 1: doing relatively well. Domestic focused as opposed to international. Uh,
Speaker 1: there's been some international tensions that have been going on.
Speaker 1: And you're getting diversification though, so this is not just
Speaker 1: a pure single industry product. You are getting not only biotech,
Speaker 1: but you're getting healthcare equipment. But when you're not seeing
Speaker 1: the larger cap Johnson and Johnson merks that people tend
Speaker 1: to think of with healthcare stocks, good product. There's a
Speaker 1: lot of good small cap products that are out there.
Speaker 1: The number two top performing e t F here today
Speaker 1: x web what's that also, by the way, Yes, so
Speaker 1: this is um uh fairly new product. It's the spider
Speaker 1: SMP Internet et F and I think f d N
Speaker 1: is right behind it. That's the first trust Internet. Look,
Speaker 1: this brings us back to the endless tech rally. This
Speaker 1: is an Internet E t F S. By the way,
Speaker 1: if you're looking for a fang play, that's where you go.
Speaker 1: Internet ets typically have most of the fang stocks, if
Speaker 1: not all of them, in high way to That's what's
Speaker 1: been driving these I think that's pretty much the story here. Yeah,
Speaker 1: and I mean this is an example of this can
Speaker 1: be hidden gems out there. X web I think has
Speaker 1: under twenty million in assets under management. It's a relatively
Speaker 1: new product. People may have missed it. However, you may
Speaker 1: not want to chase that performance because it could be fleeting.
Speaker 1: You know, the tech rally has been strong, but as
Speaker 1: we talked about it, you know, it could reverse itself.
Speaker 1: And just one more thing about the Internet ETFs F
Speaker 1: d N, which has a longer history, which is number
Speaker 1: three year today and change right, let's stretch back ten
Speaker 1: years just to explain this is just like a relentless
Speaker 1: loop we're on with Internet. Is that this thing is
Speaker 1: up five two in ten years. The market is up
Speaker 1: a hundred and six, So I mean it's basically lapped
Speaker 1: at by three or four times, and that's just what's amazing.
Speaker 1: Um having Internet and some in biotech, which I think
Speaker 1: is driving some of the healthcare ETF if you go
Speaker 1: back and I'm telling the analysts every year forget flows,
Speaker 1: but in performance, those two areas are just relentless. They're
Speaker 1: they're either near the top or at the top. Biotech,
Speaker 1: Internet and it's just the same thing this year. Yeah,
Speaker 1: I mean, and the benefit of those industries tend to
Speaker 1: do relatively well. Obviously with e t S you get
Speaker 1: the benefits of diversification. So you mentioned about m and
Speaker 1: a activity that can be happening within this space specifically
Speaker 1: small caps or or and the spider product x web
Speaker 1: is an equal weighted product, so you're all going to
Speaker 1: get some small cap exposure to it. Not everything is
Speaker 1: going to go up, but you get the benefits of diversification,
Speaker 1: and you can look inside these products and get to
Speaker 1: know these companies all right, Eric, when you look over
Speaker 1: the rest of this list of top performing ones you're
Speaker 1: to date, are there any other e t F that
Speaker 1: pop to you? Yeah, nib every now and then you
Speaker 1: just get some outrageous commodity that just either there's a number,
Speaker 1: by the way, Yeah, this is the iPath Coco point
Speaker 1: eight percent here to do. Yeah, this is the Coco
Speaker 1: E t N. And you know, so occasionally these kind
Speaker 1: of wacky commodities that you forgot about make it on
Speaker 1: the US. Like coffee was all the rage maybe like
Speaker 1: two or three years ago in my morning. Right, you
Speaker 1: think coffee would be like on it every year, given
Speaker 1: how much people drink it. But coco um, you know, look,
Speaker 1: it's probably someplace where there's um a supply issue and
Speaker 1: then boom it spikes up. So it's interesting. It reminds me,
Speaker 1: by the way, and the reason I think it's it's
Speaker 1: just how ETFs have wrapped up everything. And I would
Speaker 1: be careful investing in like a Coco E t M
Speaker 1: because it's holding futures, it's rolling, and typically it's down.
Speaker 1: If I go look at the five year performance of
Speaker 1: the Coco E t N Todd, what do you think
Speaker 1: the performances over the last five years, I would think
Speaker 1: you would have lost money down eight percent um, which
Speaker 1: isn't bad. It's better than I thought. But a lot
Speaker 1: of this is from rolling and it's very complicated, but
Speaker 1: these commodity futures tend to pop up with the ones
Speaker 1: that tracked the single commodity. You'll find them here and
Speaker 1: there on the top twenty. And I think what you
Speaker 1: also see here, based on the Bloomberg data that you
Speaker 1: made available to help me out for this effort, is
Speaker 1: his net outflows. So usually you see money chase, seeing performance.
Speaker 1: This is actually people take either taking chips off the
Speaker 1: table of a relatively small product to begin with, We're
Speaker 1: gonna take our chips off the table. Todd rosen Booth,
Speaker 1: thank you so much for your good to be with
Speaker 1: you guys, Joel. I know you like your plugs. You
Speaker 1: do business week plugs all the time. I have one
Speaker 1: for myself. You know, we do audio, we have TV,
Speaker 1: but we occasionally do in person appearances. It's like catching
Speaker 1: this live and um my colleague Tom Sara Vegas, who
Speaker 1: was a guest on one of the episodes. He's great.
Speaker 1: He's going to be touring Europe and we have four
Speaker 1: events planned for four major cities there in Amsterdam, Frankfort, Paris,
Speaker 1: and Zurich uh starting next week through the next two weeks.
Speaker 1: So if you are in Europe and anywhere and you're
Speaker 1: one of those cities and you want to go. You
Speaker 1: can go on the terminal and type SCMR to sign up,
Speaker 1: or just send me an email ed Baltunists at Bloomberg
Speaker 1: dot net and I will get you signed up for
Speaker 1: the event. It's free and there's gonna be really cool.
Speaker 1: We've got some issuers there, Vanguard, etcetera. UM, so check
Speaker 1: it out. Thanks for listening to Trillions until next time.
Speaker 1: You can find us on the Bloomberg terminal, Bloomberg dot com,
Speaker 1: Apple Podcasts, and whever else you like to listen to podcasts.
Speaker 1: We'd love to hear from you. We're on Twitter, I'm
Speaker 1: at Joel Weber Show, He's at Eric Baltunas, and you
Speaker 1: can get Todd at Todd c f r A. Trillions
Speaker 1: is produced by Magnus Hendrickson. Francesca Leedy is the head
Speaker 1: of Bloomberg podcast Bye