The late Berkshire Hathaway (BRK-A, BRK-B) Vice Chairman Charlie Munger, alongside CEO Warren Buffett, was a big supporter of passive investment strategies and ETFs. VettaFi Head of Research Todd Rosenbluth sits down with Yahoo Finance Live to discuss major themes unfolding in exchange-traded funds, including AI plays and pending spot bitcoin ETF approval from the Securities and Exchange Commission.
"We think investors are going to hold on to thematic ETFs for the longer time horizon, and of course, we are on the cusp... of a spot bitcoin ETF," Rosenbluth says. "Not exactly a thematic-oriented ETF, more of an alternative investment."
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- Charlie Munger, vice chairman of Berkshire Hathaway and longtime right hand man to Warren Buffett, has died. Now he was 99 years old. Investors around the world have often turned to Buffett and Munger over the years for wisdom and advice. Now both men are well known for their investment patience. And it's often Buffett who talks about passive investing, the fact that it is a winning strategy.
Now Berkshire Hathaway over the years, along with many others, have been doing just that often through index funds and through the use of ETFs in some cases. So joining us now for ETF report brought to you by Invesco QQQ, we want to bring in Todd Rosenbluth. He's VettaFi's head of research. And Todd, it's great to see you here. I'm curious to get your perspective just on Berkshire Hathaway and Buffett in particular when it comes to being a proponent of passive investing and some opportunities within ETFs. What do you think that's done for ETF adoption and getting more investors around the world on board?
TODD ROSENBLUTH: Yeah. The world's most famous active manager has been advocating for using index-based strategies, particularly the S&P 500 and we've seen it this year as well as in prior years. The iShares S&P 500 ETF IVV. The Vanguard S&P 500 ETF VOO. Those are two of the more popular ETFs this year, again topping the league leaderboard in terms of net inflows.
We've seen investors embrace low cost, passive-oriented ETFs for a number of years. That's where investors are putting money into. And particularly in this time of tax loss harvesting where mutual fund companies are passing on capital gains to shareholders. ETFs are not. And that's why we think ETFs continue to gain market share, specifically these low cost products like IVV and VOO.
- What are some of the top thematics that you're seeing play out within ETFs right now, Todd?
TODD ROSENBLUTH: Yeah. So you were just touching earlier just before the break on artificial intelligence. This has certainly been the year of artificial intelligence. We're about the one year anniversary of ChatGPT. Artificial intelligence ETFs like THNQ. That's a ROBO Global ETF. It offers broad diversification across various themes connected to artificial intelligence. We've seen strong investor interest in that ETF as well as some of its peers.
In recent weeks, we think investors are going to hold on to thematic ETFs for the longer time horizon. And of course, we are on the cusp we think of a spot bitcoin ETF. Not exactly a thematic-oriented ETF. More of an alternative investment. But we at VettaFi, we're talking yesterday during a VettaFi Alternative Symposium with industry leaders from Grayscale, Bitwise, ProShares, and Galaxy about the potential of what this could do for the industry in 2024. What do you think it could do for the industry in 2024? And you talk about the timeline of one. What do you think is realistic?
TODD ROSENBLUTH: So we expect that by the time we at VettaFi our hosting the Exchange Conference in February 2024 around Valentine's Day, we will have multiple spot bitcoin ETFs that are trading. We could see Grayscale's GBTC get converted into an ETF. We could see BlackRock and Bitwise and a number of other firms offering a spot bitcoin ETF.
We think it's going to open the door for more mainstream-oriented investors to adopt a slice of their portfolio to this alternative investment. We don't think we're going to see a huge wave of money the first couple of days. We do think it's going to in the first year be a popular product. There's clamoring. There's people that are waiting for an ETF that offers spot bitcoin exposure. And we think based on what we heard at the VettaFi Alternative Symposium, there's interest in people doing more research.
- Why wouldn't that create then a sell the news event that could more broadly impact some of those ETFs that are hinging specifically on the approval of anything that would be annexed or tracking against Bitcoin in ETF form?
TODD ROSENBLUTH: So could the price of Bitcoin be impacted negatively because people have been moving in to Bitcoin in general in anticipation of new buyers from a spot bitcoin perspective? Certainly. I'm not an expert in that. But we do know that there are investors that have held out investing in cryptocurrency because they want the efficiency and the exposure through an ETF.
And the ability to do that in a spot-based product from leading providers tied to the crypto space like Grayscale and Bitwise and from established asset managers like BlackRock and Fidelity, we think that's going to open the door for adoption of the ETF. I'll hold off to others to determine what happens to the price of Bitcoin going forward.
- So the other thematic ETF or thematic, I guess, trend that you've seen amongst investors that are favoring ETFs right now is within the AI space. I'm curious what the excitement level is like today when you compare it to what you maybe saw during the first half, even the first few months of the year, and whether or not that excitement is going to hold here looking ahead to 2024.
TODD ROSENBLUTH: So we started off the year with artificial intelligence being popular as ChatGPT first came out, and people started to become aware of it and started to test it out. We've seen a resurgence in interest in artificial intelligence given the news related to ChatGPT and Microsoft. I think investors are refocusing on it. And heading into 2024, we are seeing interest in THNQ, that ROBO Global ETF. We're seeing interest in other products. Global X has a product, AIQ. We do think heading into 2024, thematic strategies are going to play a role, and tech-oriented ones, like the ones we just touched on, could gain some strong ground.
- Todd, all I know is somebody picking up that guitar at the VettaFi holiday party and just absolutely shredding. Looks sick back there. Todd Rosenbluth, VettaFi head of research. Thanks so much for joining us here today.
TODD ROSENBLUTH: Thank you.