ETFs in 2023: Year in Review

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On this episode of ETF Prime, host Nate Geraci speaks with a pair of individuals discussing several different ETF-related topics. His guests include VettaFi’s Lara Crigger who gives her perspective on overlooked ETF stories from 2023. Geraci also speaks with Morningstar’s Ben Johnson who gives his take on what he has seen from ETF flows this year and more.

Overlooked ETF Stories

To open the podcast, Geraci brings on VettaFi’s Lara Crigger to discuss some of the most overlooked stories in the ETF industry in 2023. Before her appearance on the show, Crigger created a list of some under-the-radar ETF stories she has seen this year. In Geraci’s opinion, the most unsurprising topic on her list is Blockchain ETFs. Crigger highlights that despite the interest that Blockchain ETFs garnered in both 2021 and 2022 they didn’t get that same attention in 2023. This surprised Crigger because 2023 was the year that this style of ETF performed well.

“This is the year that Blockchain ETFs were just stand-out performers,” Crigger said.

Crigger then points out that when looking at the top five highest-performing ETFs of 2023 four of them hold Blockchain and Crypto companies inside of them. She then gives data on some of those funds including Schwab Crypto Thematic ETF (STCE) and Bitwise Web3 ETF (BWEB). In addition, Crigger gives reasons as to why she believes these funds have performed so well this year.

AI-Driven ETFs

The conversation then shifts gears when Geraci highlights the next under-the-radar story that Crigger had on her list. Another one of the other stories she listed was artificial intelligence-driven ETFs. Geraci mentions that AI was one of the biggest stories in the markets this year, but AI-driven ETFs were never really a focus point. He then asks Crigger for her thoughts on why she included this on her list.

“The ETFs that use AI to pick stocks just really aren’t catching fire with investors,” Crigger said.

Crigger then adds how much it surprises her that in a year where artificial intelligence has dominated media coverage and the markets these styles of funds haven’t gotten the same attention as funds that hold AI companies. She uses funds like the Global X Artificial Intelligence & Technology ETF (AIQ) and QRAFT AI-Enhanced U.S. Large Cap Momentum ETF (AMOM) as tickers that fit in this category and shares that they haven’t taken in a significant amount of cash despite the AI hype. Crigger then shares on the contrary, that funds that hold AI companies have taken in a significant amount of money compared to those AI-driven funds revealing an overall lack of investor interest. Additionally, she shares that despite not taking in a large amount of money funds like AIQ and AMOM have still performed significantly well in 2023.

The pair also discuss what the future of this space will look like, and if investors will ever completely give the keys to AI.

Commodity ETFs

One of the last topics on Crigger’s list for overlooked stories in 2023 is commodity ETFs. Geraci highlights that Crigger specifically pointed to the Teucrium Sugar Fund (CANE) as a fund that she believes has been overlooked this year. Geraci senses that Crigger feels that commodities have been overlooked in 2023 as a whole.

“I think commodities are always overlooked,” Crigger said.

Crigger mentions that the only times investors tend to look to commodities is if their performance is noticeably growing. She also recalls that in times like 2007, investors also looked to this sector. However, overall Crigger feels that commodities are an underappreciated asset class. Furthermore, Crigger gives an in-depth explanation of why the CANE ETF has performed extremely well this year.

The pair closed the conversation by discussing the future of commodity ETFs, going in-depth on the energy sector and more.

ETF Flows of 2023

To close the podcast, this week Geraci brings on Ben Johnson the Head of Client Solutions and Asset Management at Morningstar. The pair of professionals discuss some of the biggest stories in terms of flows that Johnson has seen in 2023. Before the conversation, Geraci mentioned that the ETF industry is closing in on a half-trillion dollars in inflows this year. Geraci then asked Johnson what has stood out to him the most in terms of flows in 2023.

“You almost have to divide what we’ve seen in flows in 2023 to everything that happened before November, and everything that happened in what was a November to remember,” Johnson said.

Johnson mentions that November saw $110 Billion of net inflows into ETFs. This was the strongest month of inflows that the ETF industry has seen since 2021. Johnson says that in 2023 overall flows have gone into funds that are considered to be less risky. The duo then dove into sharing their thoughts on the significance of inflows that the iShares 20+ Year Treasury Bond ETF (TLT) has seen this year. Johnson also gives his take on the flows that active ETFs have seen this year as well.

To close their conversation, Johnson and Geraci discussed other noteworthy themes, stories, and firms in the ETF industry from 2023.