Key ETF themes to think about ahead of Exchange Conference

The Exchange Conference, aimed at helping financial advisors learn more about ETFs to better help clients and their portfolios, will take place in Miami, Florida this weekend. With a wide world of ETFs out there, it can be difficult for advisors and investors to know where to focus on.

Todd Rosenbluth, VettaFi Head of Research, joins Yahoo Finance to discuss the Exchange Conference, the key themes that will be in focus, and how Federal Reserve policies may have an impact on certain ETFs.

When asked about the Fed's potential interest rate cuts and how advisors and investors are weighing risk, Rosenbluth says: "We're hearing from advisers and their clients that they're more comfortable to take on some additional duration risk as well as some additional credit risk, as opposed to hunkering down in Treasuries the way they did in 2023. And we've seen that in the flows, so Vanguard's investment grade corporate bond ETF... has seen really strong inflows this year. Investors take on four or five years of duration through this ETF. They're getting investment grade high-quality bonds, and we expect we're going to hear more about that at the conference."

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Nicholas Jacobino

Video Transcript

AKIKO FUJITA: Well, financial advisors are gearing up to gather at the Exchange Conference where they can find building blocks for robust portfolios and industry insights. Joining us now to tap into some of those insights with key ETF themes to watch, let's bring in VettaFi Head of Research Todd Rosenbluth for our ETF report brought to you by Invesco QQQ. Todd, good to talk to you today. Walk me through some of the key themes you're looking at.

TODD ROSENBLUTH: That's right. So the Exchange Conference is kicking off this weekend in Miami, Florida. We're expecting about 2,000 people will be in attendance. Most of that will be either financial advisors or other people who are looking to buy ETFs.

So we geared the agenda to both help them out from an advisor standpoint and talk about ETFs. So we've got a few key themes we've got in focus. We're going to talk about actively managed ETFs. They've been punching above their weight. And we've got new products that have come to market from T Rowe Price and Morgan Stanley, among others.

We're going to be talking about fixed income given the interest rate environment that's likely to change with Vanguard, among others. And we're going to talk about thematic ETFs because artificial intelligence was very popular in 2023. We'll see if it continues. We're going to talk with iShares and Invesco, among others.

RACHELLE AKUFFO: So I want to dig into the thematic ETFs because you've noted artificial intelligence ETFs will be in there but also some of these health ETFs, which there's sort of been a mixed view on sentiment around investing in those. How are you navigating that? How are you advising clients on that?

TODD ROSENBLUTH: So you're right. Artificial intelligence was the stronger performer in 2023. We had ETFs like the ROBO Global Artificial Intelligence ETF. THNQ and some of its peers were up quite strongly in 2023 and have started out in 2024 to be quite positive.

We are seeing that health care is topical with many financial advisors they want some of the benefits of diversification. But there's areas like genomics that's longer term in focus. And so Invesco has one of those ETFs that we're going to be talking about on stage at the conference.

AKIKO FUJITA: We're getting a little more clarity. I hesitate to say that because we don't quite know how many rate cuts are in store for 2024 but at least a little more clarity from the Fed about the beginning of a rate cutting cycle. With that in mind, do you advise clients to take on a little more risk in that-- or in the face of that?

TODD ROSENBLUTH: We do. We're hearing from advisors and their clients that they're more comfortable to take on some additional duration risk as well as some additional credit risk as opposed to hunkering down in treasuries the way they did in 2023. And we've seen that in the flows.

So Vanguard's investment-grade corporate bond ETF-- the ticker is VCIT-- has seen really strong inflows this year. Investors take on four or five years of duration through this ETF. They're getting investment grade, high quality bonds. And we expect that we're going to hear more about that at the conference.

Advisors still want to get their arms around how many rate cuts are likely. The Fed is guided that it's not going to happen rate cuts until perhaps the middle of 2024. The market had been more aggressive. We know this is going to be a hot topic at the Exchange Conference.

RACHELLE AKUFFO: And of course, we know about the run-up in the spot bitcoin ETFs. We're getting a little bit more clarity on the winners and losers here. But how much of a risk appetite is there in the people that you're talking to for these bitcoin ETFs?

TODD ROSENBLUTH: So you're right. This is still early days. We're about a month into having 10 different spot bitcoin ETFs that came to market as well as the grayscale GBTC ETF that converted into an ETF.

We've seen a couple of firms rise to the top, in particular BlackRock's ETF, IBIT, and Fidelity's ETF. We are also seeing some other firms have success. So Bitwise BITB has been one of the more popular ETFs. And they're going to be on stage talking to one of my colleagues at the Exchange Conference about educating towards Bitcoin. This is still very early days.

To your question, we're seeing advisors interested in having one to 3% of their portfolio dedicated to their cryptocurrency. But they want to get off of zero. And if they want to get off of zero, then they need to understand what the drivers are of cryptocurrency and understand the differences between some of the products that are out there.

RACHELLE AKUFFO: Indeed. It's certainly going to be a key theme that I know I'll be keeping a track of. Todd Rosenbluth, thank you as always for joining us.

TODD ROSENBLUTH: Thank you.