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The biggest change in ETFs has been ‘giving investors more choice’: Expert

BlackRock Head of US Megatrends and International ETFs Jeff Spiegel joins Yahoo Finance Live to reflect on the past 30 years in the ETF space, how the ETF market continues to grow, and what investors can expect out of it.

Video Transcript

DAVE BRIGGS: From 30 years ago, the Spider S&P 500 ETF launched, becoming the first ETF listed on US exchanges. It began with 6.5 million in assets and has since become one of the most successful to date, topping $354 billion, with the ETF industry as a whole approaching 10 trillion.

We'd like to bring in Jeff Spiegel, BlackRock head of US Megatrends and International ETFs. And this week's ETF report brought to you by Invesco QQQ. Good to see you, sir. 30 years. Happy birthday to ETFs. Biggest change you think over those decades.

JEFF SPIEGEL: Happy birthday, indeed. Thanks for having me back. I would say the biggest change has been giving investors more choice. So if we think about the start of the ETF vehicle, we're talking about the S&P 500, we're talking about US large cap. Then we moved into a period of getting to US small cap ETFs, of emerging markets, of developed markets. We went more and more granular. We broke up US markets into 10 or 11 gig sectors. We broke up international markets into 40 plus different countries.

So the first sort of 20 or so years of the history of the ETF has been getting more granular. What I look after here at BlackRock and Megatrends is sort of one of the newer innovations of ETFs, which in some ways is going broader. When we think about indexation, we think about rules. How do we bend those rules a bit? How do we get more creative to capture themes, say clean energy, or electric vehicles, across a value chain that breaks traditional geographic boundaries, or sector boundaries, or style boundaries?

All of this fundamentally is about giving investors greater choice. And we couldn't be more proud at iShares to be the number one choice of investors, as the largest ETF issuer in the world 30 years after the creation of the vehicle.

SEANA SMITH: So Jeff given the success, given how much money has been put into ETFs, what, the industry is approaching 10 trillion in assets as we head into this year. When we talk about some of those thematic strategies, what you were just talking about, the next 30 years, what do you think that holds for the ETF industry?

JEFF SPIEGEL: I think it holds more and more creativity. Megatrends, which is our sort of view of BlackRock, the long term structural forces transforming the world, is a range of ETFs that we build focused on technology and demographics, urbanization, climate change, the rise of middle class consumers in emerging markets. As those innovations continue to evolve, our commitment is to keep delivering ETFs so that investors can stay at the cutting edge of innovation, at the cutting edge of transformation.

But if you think about a megatrend of today, maybe it's cybersecurity, maybe it's robotics, at some point, that will become a traditional industry. We'll be looking to another megatrend. 50, 75 years ago, aerospace or rail would have been a megatrend. And then it just becomes a traditional industry. So we'll see the proliferation of traditional industries. But at the same time, we'll keep pushing forward to make sure that investors also have long-term structural growth themes, areas of innovation and transformation in the economy in the ETF wrapper.

DAVE BRIGGS: And in the next year, those we're talking long-term transformational type project. But in the next year, we're still looking at a rising rate environment. We're still looking at a lot of projections of a basically flat ETF, excuse me, S&P. What are your projections over the next 12 months or so?

JEFF SPIEGEL: So in our outlook for the year, what we're really focused on is the return of dispersion. If you think about 2020 and 2021, when it seems like no matter what you did, markets were up, in 2022, where it kind of felt the opposite, like no matter what you did, markets were down, they seemed very different but actually have a really important commonality. And that commonality is dispersion was incredibly low. Stocks were just moving together.

What that means this year with dispersion already returning significantly is, investors have to get pickier. They have to be more thoughtful about what exposure they're looking for. And there's really three areas that we would highlight that we think investors can benefit from even in this environment. The first is areas where we know money is going to be coming from government regulation and legislation. That's clean energy and electric vehicles, are tickers iClean, ICLN, for clean energy, and iDrive, IDRV, for electric vehicles.

It's areas with near-term breakthroughs like genomics, mRNA vaccines, like neuroscience, major breakthrough just approved against Alzheimer's, tickers there IDNA and IDRM. And then last and certainly not least, even though some investors have been shy in technology space, we think that robotics, because it's literally combating many of the supply chain challenges today through making labor more accessible, supercharging in the midst of a shortage of workers, and cybersecurity, which is really moved from niche to necessity.

It's not something that can be cut in a downturn. And the tickers there, IHAK, iHack, or cybersecurity ETF, and IRBO, are robotics an AI ETF.