July saw an influx of assets in many of the largest known ETFs, with investors pouring in $61 billion. Many of these ETFs flew under the radar for a significant period of time but saw increased investment in July. Todd Rosenbluth, VettaFi Head of Research comments, "it's exciting for us to dig into these up-and-coming ETFs."Rosenbluth highlights the investing potential for ETFs in the fixed-income and AI landscapes, as well funds for hedging against inflation.
- The month of July saw an impressive influx of assets in many of the largest known ETFs with investors pouring in $61 billion. IShares core S&P 500 ETF pulled in $11 billion, the Vanguard ETF, $3.9 billion, and the Invesco QQQ trust added $3.7 billion. But there are several lesser known ETFs that saw unexpected demand throughout the month.
As part of the ETF report brought to you by Invesco QQQ, let's bring in VettaFi Head of Research, Todd Rosenbluth, to discuss this more. Good to have you back on, Todd.
So some of these ETFs that have been flying under the radar but doing well in July, let's start with some of your top picks. I want to start with JPMB, that's JP Morgan USD Emerging Markets Sovereign Bond ETF. What was the catalyst there?
TODD ROSENBLUTH: So what we saw is investors have been embracing risk or they did in July. It was more of a risk on environment, investors got more comfortable looking out for yield. And JPMB saw really strong inflows at the end of July, and it continued in the early days in August. Now, this is an ETF that provides emerging market, high yield, fixed income exposure to countries like Brazil that are more commonly found in the emerging markets ETF. But also countries like Oman and the Dominican Republic are some of the larger exposures.
This is a more filtered ETF from an emerging market exposure than iShares EMB ETF. JP Morgan has some screens to try to make sure that investors have a better understanding of the risks that they're taking on from a country perspective. And as you noted, we've seen some of the big boys within the ETF industry, big boys and girls of AGG and QQQ among others. But it's just exciting for us at VettaFi to dig into some of these up and coming ETFs that we've seen pop up and flows using our logically data.
- It's true, because you see a lot of interest in emerging markets where people are not really sure how to approach it, so obviously ETFs are a good way to get into it. And of course, we have to talk AI because we've seen that pop up in every earnings call as we knew we would. So let's talk about AIQ there. Let's talk about that one and what some of the holdings are showing us for people who are trying to get into this space but perhaps a little more cautiously.
TODD ROSENBLUTH: So the benefits of using a diversified ETF like AIQ spreads that risk around. So this is a mega trend that we at VettaFi have been seeing and seeing investor interest and advisor interest on our VettaFi platform. It's one of the reasons we at VettaFi are having a symposium at the end of the month, an AI symposium, folks can learn more about that at ETF Trends.
But global access AIQ ETF, which is an artificial intelligence and technology ETF, it owns some of the heavyweights within the growth space. So Amazon and Alphabet, those are not technically technology companies in many ETFs. And it has exposure to other companies up the food chain and up and down the food chain that are going to benefit from this trend. We think AI is a long-term mega trend, and the future is really now. And we're hearing it from the companies, and we're seeing investors really gravitating towards learning about these ETFs.
- And we're seeing more of a push towards the sort of ETF approach when you look at the price of, say, an Nvidia. Is this a better way to get into this space? And as you mentioned, this is a long-term play. We don't even know who the biggest players are going to be say, 5, 10, 20 years from now.
TODD ROSENBLUTH: That's true, we don't know who the clear winners are going to be. And so it helps to spread that risk around, have exposure to companies across the AI universe. Technology companies, consumer discretionary companies, communications, services companies. And instead of just buying one individual stock, an ETF like global X's AIQ gives you the benefits of diversification.
And that's why we're seeing strong inflows into this ETF. It crossed the $500 million mark. It was very small at the start of the year, and it picked up in July, according to our VettaFi data.
- And also making your list, TOTR. Talk about the catalysts there and what the expectations are for that ETF.
TODD ROSENBLUTH: We are seeing really strong interest in actively managed fixed income ETFs. And so TOTR is offered by T. Rowe Price. Many viewers are probably quite familiar with T. Rowe Price as an active mutual fund manager. They entered the ETF marketplace a few years ago with both equity products as well as now fixed income products.
TOTR is a core bond fund. It's actually outperforming AGG thus far this year. The management team is adding appropriate risks and getting rewarded for that. And so we're seeing investors gaining comfort in active ETFs. They believed in active management for years, they just now have many more choices from T. Rowe Price and other fund families to choose from.
- And we know a lot of investors still chasing those yields in this environment. So talk about TLTW and the sort of returns that people are seeing right now. And how do you see that perhaps changing as we sort of see what the Fed does, get the CPI data, and eventually at some point, the Fed stops hiking?
TODD ROSENBLUTH: Well, you notice and the viewers probably noticed that we cited ETFs outside of some of the larger fund families initially. TLTW is an iShares ETF. IShares is the largest player within the space, so it's hard to find an under the radar ETF from them.
But we've really seen interest in this buy-write strategy, which is using options to dampen the risk and dampen the volatility of getting long-term Treasury exposure. And so TLTW has actually outperformed the more traditional long-term Treasury ETF, which goes by the ticker, TLT, that's the iShares 20-year Treasury ETF. It's outperformed, it's protecting more of the downside, it's offering income.
For investors that are nervous about a potential recession, long-term treasuries are often a good flight to quality for people to turn to. They now have an additional product from iShares that is now over $700 million in assets under management. We spotted it a couple of months ago when it was under $200 million, and it's continued to snowball the assets.
- And on the flip side of that, perhaps any ETFs looking less attractive as we enter this sort of environment?
TODD ROSENBLUTH: So we are seeing investors being less concerned about protecting the downside in terms of rising interest rates. I think there's expectations that the Fed is nearing or has ended its rate-hiking program that's why taking a longer term Treasury approach. So we're seeing a rotation away from some of those short-term-oriented ETFs. So ETFs like SHY, another iShares ETF, which is very short-term downside protection focused.
Investors are willing to take on additional risk in order to get higher rewards. We saw that with that emerging market ETF from JP Morgan, and we're seeing it with TLTW as well.
- Well certainly, lots of interesting options for investors to weigh there. Great to have you on. VettaFi Head of Research, Todd Rosenbluth, good to see you.