Crowded market themes may have no place in ETFs
The market may be entering a new phase: a shake-up of the most populous “non-traditional” strategies.
Mike Akins, co-founder of ETF Action, argues that not everything stuffed into exchange-traded funds, including private assets, makes sense and should be questioned a bit.
“The ETF wrapper is more efficient for a lot of things. Not for everything,” Akins told CNBC’s “ETF Edge” this week, adding: “I always say I’m a top-notch ETF guy, but I’m not just an ETF guy.”
According to Akins, it’s less about the ETF structure and more about what’s going on in the world. It found that investors are more interested in gaining exposure to real asset themes such as: infrastructure and industrial reshoring is currently artificial intelligence.
“The ability to receive [an] ETF launches have become very common. “It’s very easy if you have the right provider or partner. So I think the investor will drive the next theme based on the market,” Akins said.
He expects this to drive ETF product innovation, for better or worse.
“There’s always a little bit of a search for performance, and sometimes the trade ends when the themes hit the market,” Akins said. “But we have no reason to think we will run out of innovation in the ETF space.”
‘It’s your responsibility’
He lists the macroeconomic landscape, leaders, and lagging changes as catalysts for industry alignment. Akins argues that new themed funds could become tactical tools that place more responsibility on investors.
“If you’re investing in these niche strategies… your success depends on your trust in your manager, your ability to use the product at the right time,” he said. “It’s up to you to decide whether it’s a good time to invest.”
This dynamic is creating a shake-up, especially in the hottest corners of options-based product design. Looking ahead to the rest of the year, Akins expects consolidation of non-traditional ETF strategies.
He noted the recent wave of so-called copycat launches, in which issuers have rapidly introduced similar products, including different covered call and buffer strategies.
“We will start to see a consolidation of the strategies that are performing best and gaining market share,” he said. “So I think there will be a consolidation shift. I think they will continue to grow and be embraced by investors. But I think we will start to see some serious winners and losers in this.”
The reason: Everyone has started something, and you can’t have so many strategies following the same point.
At the same time, ETF innovation may be shifting from what funds own to how they are managed. Tidal Financial Group’s Aga Kuplinska thinks AI is increasingly finding its way into the investment process, moving beyond simple “AI-themed” portfolios.
In the same interview, Kuplinska told CNBC that Tidal is already seeing early signs of this transition in the market.
“We’ve already seen launches or applications of AI-powered or AI-driven products on our platform,” said the firm’s senior vice president of product development, calling it an area where “we’re just scratching the surface.”
