Developing Trends in the ETF Industry for 2018

MarketsETF Trends

The exchange traded fund industry is maturing and the markets could extend their bullish march. As 2018 gets under way, there may be a number of trends that could stand out this year.

“I see plenty of opportunities in equities where you’ve got choices there,” Jae Yoon, Chief Investment Officer for New York Life Investment Management, said at the’s Inside ETFs 2018 conference. “I would actually argue, maybe, the tools and education is more needed. In fixed income, we think there’s opportunity for more solutions for our clients.”

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To help investors better access potential opportunities in the U.S., IndexIQ has partnered up with Chaikin Analytics to launch the multi-factor IQ Chaikin U.S. Small Cap ETF (NasdaqGM: CSML) and IQ Chaikin U.S. Large Cap ETF (NasdaqGM: CLRG). The smart beta ETFs incorporate the so-called Chaikin Power Gauge that combines four primary factors, including value, growth, technical and sentiment.

Along with the rise smart beta strategies hitting the market, there is an increased need to educate advisors and investors about the inner workings of these products and how to best incorporate the strategies into a diversified investment portfolio.

According to the latest 2018 FTSE Russell Advisor Smart Beta Survey, which covered 256 full-time, fee-based financial advisors and wealth managers divided almost equally between the U.S., U.K. and Canada, 47% respondents revealed the only thing holding them back from utilizing smart beta strategies in their own portfolios is that they don’t know enough about how they work.

IndexIQ is also one of the few that offers several smart beta fixed-income strategies, or bond ETFs that do not follow the traditional market cap-weighting scheme, including the IQ Enhanced Core Bond U.S. ETF (NYSE Arca: AGGE) and IQ Enhanced Core Plus Bond U.S. ETF (NYSE Arca: AGGP), which were launched in May of 2016, and the IQ S&P High Yield Low Volatility Bond ETF (HYLV), the first high yield low volatility fixed income ETF, which launched in February of 2017.

“We’re focusing on generating a better source of alpha for our clients in the core fixed-income category, and secondly, as they lean into income, we’re looking for a better way to provide liquid, higher income while protecting their downside risk,” Yoon said, pointing to options like AGGP.

For more ETF-related commentary from Tom Lydon and other industry experts, visit our video category.

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