Fixed Income & ETF Innovation

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On this episode of ETF Prime, host Nate Geraci speaks with a trio of individuals discussing fixed income, innovative ETFs, and DMCY. His guests include VettaFi’s Tom Lydon, who discusses significant topics from the Fixed Income Symposium. Geraci also speaks with Paul Kim of Simplify ETFs, who discusses his firm and its innovative ETFs. To close out the podcast, Geraci speaks with Julie Cane of Democracy Investments, who discusses the firm’s Democracy International Fund ETF (DMCY).

Fixed Income Symposium

Geraci opens the podcast with Tom Lydon of VettaFi, discussing the recent Fixed Income Symposium event. Geraci first mentions how the event included a who’s who in the fixed income space. He also addressed the event’s exceptional turnout. The importance of fixed income as an investment theme for advisors and investors during this uncertain economic climate was also talked about. Both Lydon and Geraci mention that despite fixed income having a historically bad year in 2022, it has rebounded well in 2023. They also mention that advisors have begun to take notice.

Both Lydon and Geraci agree that this interest can be seen from several different areas. One area that shows interest has grown is the significant amount of flows the fixed income assets class has taken in. The market has also seen many interesting and innovative fixed income products come to market this year.

What Will Happen to Interest Rates?

Geraci then shifts the conversation to what he considers to be a major question in a significant number of advisors’ minds. The question Geraci brought up that all advisors want answered is what will happen with interest rates. Geraci mentions that with the yield curve still inverted, it is hard to see what will happen with interest rates. Using data collected from the event, Lydon discusses that because of this uncertainty, a lot of money is currently on the sidelines, and advisors are looking for a place to allocate it.

Lydon says many advisors have been in money market fund land recently. He believes that as we begin to see what might happen with rates, the expectation is for advisors to begin to look longer duration.

“Advisors are not going out 17 years, but they might be looking at 6–8-year funds, which is much longer than where they are now,” Lydon said.

What about Credit Risk?

Geraci then asks about what the sentiment was from advisors willing to take on more credit risk given the current economic environment.

“Specifically, 57% of advisors said that they are going to take on more duration and less credit risk,” Lydon said.

Ultimately the pair discussed that advisors want a more stable fixed-income environment. Lydon discussed that holding an event like this in the heat of summer was extremely important. To close the segment, the conversation touches on several other significant statistics and topics from the event. Lydon also discusses that there is a possibility that VettaFi will continue to host these kinds of events because of the success of this one.

Innovative ETFs

The conversation then shifts to innovation when Geraci brings on Paul Kim of Simplify ETFs’. Geraci discusses that Kim has a highly successful track record in the ETF space. Kim’s current firm offers around 26 ETFs with over $2.0 billion in assets. The firm has also launched five new ETFs this year alone. Geraci mentions how these achievements are extremely impressive, seeing that Kim’s firm only started three years ago. The pair also discuss how Simplify has one of the most unique lineups on the market.

“I think the overarching theme of our ETF platform is that we are trying to create an alternative provider for ETF vehicles,” said Kim.

In addition, Geraci and Kim spotlight several of the firm’s unique ETFs, like the Simplify Short Term Treasury Futures Strategy ETF (TUA) and the Simplify Volatility Premium ETF (SVOL).

Democracy International Fund ETF (DMCY)

Geraci then speaks with Julie Cane of Democracy Investments. Cane began her career flying helicopters in the US Navy. She was eventually recruited out of the military to work in the investment industry. Cane is now working on the Democracy International Fund ETF (DMCY). The fund has garnered a lot of positive attention due to it being significantly different compared to what else is on the market. The pair also discuss the intricacies of the fund’s index, which is the Democracy Investments International Index. Geraci then moves the conversation to the fund’s overarching investment thesis.

“Our overall investment thesis is that democracy will outperform authoritarians over the long term,” said Cane. The podcast then closes with the pair discussing several of the other key characteristics the unique DMCY fund offers.