Rising ETF Stars, NOPE, & ETF Central

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On the latest episode of ETF Prime, host Nate Geraci was joined by VettaFi’s editor-in-chief Lara Crigger and chief product and innovation officer Tom Hendrickson to highlight 2022’s ETF rising stars. George Noble explained the Noble Absolute Return ETF (NOPE). For the final segment, NYSE’s Mo Sparks and Trackinsight’s Robert Jaeger discussed their new collaboration, ETF Central.

Taking a moment to discuss the strategic partnership between VettaFi and TMX, Hendrickson applauded the cultural alignment between the firms, noting that the $175 million dollar investment “allows us to do more, faster.” Though VettaFi is still less than a year old, Hendrickson pointed out that there are decades of experience under the VettaFi umbrella. The partnership with TMX adds fuel to VettaFi’s fire. Hendrickson said, “we know there is a heck of a lot of work to do, the opportunity is huge, but it’s great to be on that journey together with them.”

Last week, Crigger published the top ten rising stars of 2022 which leaned on VettaFi’s bespoke data to list the ten ETFs that saw the most year over year advisor engagement increases.

According to Hendrickson, “there’s a lot of innovation around how we think about advisor engagement.” The data in the article focuses on funds about $100 million AUM (since that is the threshold for most ETFs to appear on most advisor platforms).

The Rising Stars #6-10

Coming in at number 10 on the list was the Invesco Aerospace & Defense ETF (PPA) with 173% increase. Number nine was the Direxion Daily Real Estate Bear 3X Shares (DRV) which saw 178%. Numbers eight and seven were the ETC 6 Meridian Hedged Equity Index Option ETF (SIXH) and the Simplify Interest Rate Hedge ETF (PFIX) which both clocked in at 195%, and number six was the WisdomTree Floating Rate Treasury Fund (USFR) with an engagement spike of 338%.

“What stands out to me about these first five ETFs on the list is that they are frankly very defensive plays,” Crigger said, noting that though defensive, these funds aren’t reactive. She observed that PPA became extremely popular when Russia invaded Ukraine. She also offered that both PFIX and USFR are funds that are useful for advisors who want to position their clients for markets that are roiled by chaos.

USFR took over 11 billion in assets last year. “We saw a lot of interest around USFR on the platform throughout the year,” Crigger said. “We covered it quite a bit.” Despite that, it slid under the radar for many.

Rising Stars Top 5

The funds that topped the advisor engagement list included, at number five, the SPDR Bloomberg 1-3 Month T-Bill ETF (BIL) at 349%. The iShares Treasury Floating Rate Bond ETF (TFLO) with 375% took the number four spot while the Core Alternative ETF (CCOR) came in at number three with a 392% boost in engagement year over year. The number two fund was the KFA Mount Lucas Managed Futures Index Strategy ETF (KMLM) with a 471% increase. The rising star of the year, however, was the tremendous 913% jump that the iMGP DBi Managed Futures Strategy ETF (DBMF) took in on the heels of its incredible performance.

“Obviously the story of 2022 is managed futures,” Crigger offered. “They were just the runaway hits of last year.” Given the rising inflation and rates, and the attention alts experienced, Crigger doesn’t think it’s surprising that managed futures had their moment. “Managed futures were far and away the best performing of the alts category.” KLML and DBMF had an outperformance of the broader market by upwards of 40%, according to Crigger, who wouldn’t be surprised to see that success carry through into 2023.

Hendrickson concurred, adding, “the death of the 60/40 was an interesting subtext when we look at this group.” He noted that there has been a ton of innovation in the ETF space that gives advisors a greater scope of tools with which to engage the market, potentially creating some blurriness in the diagram of the 60/40.

CCOR surprised Geraci, who confessed it was off his radar entirely prior to seeing it on the list, but it fits in given its “core alternative” strategy. Geraci noted it is effectively an equity income play. All of the funds on the list had solid years, with CCOR up 3% last year. DBFM was up 22% and KMLM hit 24%. “Performance and engagement go hand to hand,” Geraci said after sharing that none of the funds on this list saw negative returns.

Exchange Special Offer

With VettaFi’s Exchange conference just around the corner on February 5th through February 8th, Geraci offered the special code “Prime” to ETF Prime listeners.

The code provides a discounted registration fee for advisors who are part of the ETF Prime community, bringing the price down from $300 to just $99.

Hendrickson added that anyone who registers over the next 72 hours will receive a free night’s stay at the iconic Fontainebleau Miami Beach Hotel that is hosting the conference.

Noble Impact Capital on NOPE

With over four decades of experience, George Noble has a storied finance career and has witnessed numerous cycles firsthand. After reflecting on his recent turn as a Twitter Spaces FinTwit Personality, Geraci and Noble turned to Noble Impact Capital’s fund the Noble Absolute Return ETF (NOPE). With a tagline of “NOPE to passive investing, NOPE to ignoring valuations, and NOPE to asset bubbles,” the fund’s philosophy can be found in its ticker.

“It was not my intention to start another fund,” Noble confessed, continuing, “then along came Twitter spaces and I kind of backed into it.” Looking around at the ETF space, which is 99% passive and considering what he believes to be a regime change, Noble’s rising FinTwit status gave him the opportunity to raise capital for a fund that could fill a niche. “I thought my skillset that I’ve amassed the last four decades could be useful in this market environment,” he told Geraci.

NOPE seeks to change exposures over the cycle and generate absolute positive returns over the cycle, according to Noble. “Not every day is going to be up, not every week is going to be up, but I think we’re in a fantastic era right now for active managers,” Nobled offered.

The fund’s holdings currently short Tesla, Robinhood, and Coinbase and have a large cash position in SPDR Bloomberg 1-3 Month T-Bill ETF (BIL). “I remain negative on markets, in general,” Noble said.

ETF Central

NYSE’s Mo Sparks and Trackinsight’s Robert Jaeger rolled out a brand-new ETF platform, ETF Central. The goal is to educate investors through data, analytics, and news content.

Sparks said, “we’re consistently trying to find ways to deliver value back to our clients and the ETF ecosystem at large.” Sparks sees ETF Central has a platform that can connect end investors to content, collateral, and perspectives from issuers. “Its been a multi-year journey for us,” Sparks said, discussing the content that NYSE has created over the years with creators like Geraci and with VettaFi and the need to create a central platform for it. Thus, ETF Central was born. Sparks hopes ETF Central can be a destination site for market participants. “Its education, education, education.”

Jaeger comes in from Trackinsight, which was founded in France in 2014. They hope to work with ETF Central and other hubs around the world to further democratize the ETF wrapper. Jaeger said, “we launched ETF Central with a few overarching goals – the first is that it had a best in class user experience.”