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Total ETF inflows YTD are over $200B: ETF Trends

ETF Trends Director of Research Dave Nadig joins Yahoo Finance's Sibile Marcellus to break down the ETFs to watch in the second half of 2020.

Video Transcript

SIBILE MARCELLUS: Welcome back to "The Ticker." I'm Sibile Marcellus. It's now time for "ETF Report," brought to you by Invesco. Over $200 billion flowed into ETFs in the first half of this year, despite the stocks plunge into a bear market and the frequent volatility spikes. That's according to CFRA Research. Joining us now to talk some more about this is Dave Nadig, ETF Trends director of research. Dave, what are the best-positioned ETFs for investors looking forward?

DAVE NADIG: Well, if you look at where the flows have been-- you know, it's worth pointing out June was a huge month with $58 billion-- nearly a record month. Now, a lot of that went into fixed income. $31 billion of that was in the US fixed income, another $11 into US equities. And a big part of that was the Fed. The Fed showed up in May and June and started buying US fixed income ETFs. They bought about $7 billion so far.

And what we've seen is the ETFs that they've been picking really have been outperformers, both in terms of gaining assets and in terms of how they performed in the market. So a few that you might be looking at there if you were trying to sort of follow the Fed would be something like the Vanguard Intermediate Corporate ETF, VCIT, which pulled in about $6 billion in June, or the iShares Investment Grade ETF, LQD, which pulled in about $3.5. Those, I think, are really classic ways of getting that exposure to the US corporate bond market. And I think that investors really have been playing this follow the Fed game.

SIBILE MARCELLUS: And how have thematic ETFs been catching on with retail investors?

DAVE NADIG: Yes. So thematics are an interesting place to think about it. What do we mean by thematics? Well, a thematic is an ETF that isn't doing something that is plain vanilla, and it's not really a sector fund. It's, instead, trying to do something a little different-- to catch a theme, if you will. And we've actually got a couple here-- one in the fixed income space, which the Fed's been buying too-- is that VanEck Vectors Fallen Angel ETF, ANGL.

That takes bonds that had recently been downgraded, which is a pretty big chunk of them lately, to junk status, and buys just those ETFs-- those recently downgraded. That's been a great strategy historically for picking up a little extra yield without a lot of extra risk. It's currently yielding about 5.5%. That's particularly attractive to a lot of investors that are focused on yield, perhaps if they're in retirement.

On the equity side, we've seen a rash of new thematic products. We just had one launch a couple days ago from direction called the Work From Home ETF-- WFH is the ticker there. It invests, like you would expect, in things that we're now using more as we work from home. So it has some obvious positions like, say, Zoom, but it also has a lot of cybersecurity, hardware companies, and it's a concentrated 40-stock portfolio that investors can use if they think that, really, we are going to have a major shift in the economy.

And maybe one last one-- we saw the launch of the Roundhill Investment sports betting and iGaming ETF, BETZ, earlier in June. It pulled in almost $100 million in just a few weeks. That one, again, is really leaning onto this idea that while we're also working from home, we're also playing from home. And for a lot of folks, that means a little gambling, a little betting, something that you can sort of take your mind off everything else that's been going on. Investors have really been looking at these as interesting satellite choices for what otherwise might be a pretty passive, low-cost core.

SIBILE MARCELLUS: For sure, but isn't there a catch when it comes of these thematic ETFs? Because isn't it about projections for post-coronavirus and not so much what's happening in the markets right now?

DAVE NADIG: Absolutely. And I think it's worth pointing out that thematic ETFs really should be thought of as pretty speculative. These aren't going to be a core position. You're not going to put 100% of your money into something like BETZ, no matter how good a fund it is, because it's trying to do a very narrow thing. So if you are going to make an allocation into funds like this, it's best to think of them as maybe a few percent satellite position in your otherwise stable core.

But that being said, I think there are a lot of folks out there who are looking at, say, the S&P 500 and thinking, gosh, do I really want to be owning energy companies and airline stocks at a time like this? Some people are saying, yes, of course. But I think a lot of folks are looking at this division in the economy being something we're seeing right now in the markets and may actually get wider as we go through a recovery.

SIBILE MARCELLUS: Well, you're definitely looking out for investors there. Dave Nadig, ETF Trends director of research, thanks so much.

DAVE NADIG: Thanks for having me.