2021 could be a big year for bond ETFs

Todd Rosenbluth, Head of ETF and Mutual Fund Research at CFRA, joins Yahoo Finance to discuss the interest in bond ETFs.

Video Transcript

ALEXIS CHRISTOFOUROS: Time now to turn our attention to the ETF market and our ETF report brought to you by Invesco QQQ. Want to bring in Todd Rosenbluth now, head of ETF and mutual fund research at CFRA. Todd, always good to see you.

So from what I understand, net inflows are sort of off the charts. We're in for a record year for ETFs and also for the bond ETFs. Talk to me a little bit about the interest you're seeing in that area.

TODD ROSENBLUTH: Sure. So we hit a record year for fixed income ETFs in 2020. We had a record year overall for ETFs in 2020. And we're likely to blow away that overall record by the end of July. We're almost at a $500 billion of net inflows already. And that was the mark-- [GARBLED AUDIO]

--inflows were slightly above that for fixed income ETFs in 2021. Investor adoption towards ETFs has really--

[GARBLED AUDIO]

--as the pace continues.

KRISTIN MYERS: Todd, I do want to ask, continuing that question about those bond ETFs now, as you were just talking about, they've done incredibly well in 2021. Do you see them really taking off now and really staying that way with all of that strength, given now that we have these inflation fears subsiding and also some of the valuations that we've seen over in equities?

TODD ROSENBLUTH: So yeah, investors are likely to rotate into fixed income from more of a defensive posture as we get more volatility in the markets during the third quarter. We've seen Treasury ETFs start to pop up in the month of July from the strong interest as interest rates have pulled back.

We think investors are going to be rotating from equity to fixed income during-- [GARBLED AUDIO]

--out of ETFs than they might have normally done in the past.

ALEXIS CHRISTOFOUROS: So Todd, I know that dividend ETFs were relatively popular in the first half of the year. And I'm wondering if investors are still putting their money to work there in the same way.

TODD ROSENBLUTH: Yeah, that's [GARBLED AUDIO]

It surprised us when we looked at the numbers from the CFRA data because of course, they were suspended or cut during 2020. But we saw strong interest in dividend-oriented ETFs, in part the ones that did very well. So dividend ETFs that have more of a value tilt, more expensive to financials and energy in the market because those tend to be higher yielding.

And so the Invesco S&P dividend revenue ETF is one of the more popular ones that we at CFRA offer. Schwab's dividend is another one, SCHD. And we also like a range of different ETFs. We like Vanguard's offerings, [INAUDIBLE] offerings. We think there's a lot of strong choices that investors have. If they look forward based on dividend strength, the [GARBLED AUDIO] S&P ETF is another one that I see you're showing on the screen.

ALEXIS CHRISTOFOUROS: All right, we're going to leave it there. Todd Rosenbluth of CFRA, thanks for being with us.