The Fastest-Growing ETFs for Advisors

ETFs are booming, and RIAs want in on the action.

Advisors are diving headfirst into the rapidly growing exchange-traded fund industry, with assets expected to surpass those of mutual funds by 2030, according to JPMorgan. A recent AdvizorPro report listed the 10 ETF issuers with the largest change in the number of RIAs using their products, based on data from the 13F filings of 5,136 SEC-registered firms. On the whole, thematic, high-fee, and tactical ETFs outperformed, with ETF turnover remaining high despite a slowdown in fund launches. It’s an area of the fund industry that advisors will want to keep a close eye on.

Leading the Pack

One reason for the shift toward niche strategies is younger advisor teams, said Hesom Parhizkar, chief technology officer at AdvizorPro. “The data is proving that you don’t have to have a super-long 10 years to start raising assets,” Parhizkar said. “Smaller teams, potentially some younger families or clients, [are saying], ‘Hey, I want to allocate my investments here, here, here.’”

Eldridge, an investment adviser specializing in structured credit, saw the most growth, at 41.5%. BondBloxx Investment Management, another newer fixed-income player that launched in 2021, was second, at 34.22%. These managers — as well as Defiance ETFs and Harbor Capital Advisors — beat out more established names, like Franklin Templeton and Motley Fool, because of “heightened demand for alternatives and persistent rate volatility,” per the report. The top three fastest-growing ETFs by number of RIA investors also back up the ongoing shift to alternatives:

• Pacer’s US Large Cap Cash Cows Growth Leaders ETF (COWG), which invests in large-cap companies with high free cash flow margins, saw the most growth, at 46%, and is up 10.69% year-to-date.
• Eldridge’s BBB-B CLO ETF (CLOZ), which invests in CLOs, took second, at 42% growth, and was up 2.9% year-to-date.
• Simplify’s Managed Futures Strategy ETF (CTA), which invests in equity, US Treasury, commodity, and foreign exchange futures contracts, saw 41% growth and was down 1.5% year-to-date.

The next fastest-growing ETFs were First Trust Advisors’ Cboe Vest U.S. Equity Moderate Buffer ETF (GFEB), the first buffer on the list, and BlackRock’s AAA CLO ETF (CLOA).

Best of Both Worlds. Niche strategies are having a heyday amid market volatility, and Parhizkar said the long-term trend remains directed away from mutual funds toward the ETF landscape, even for RIAs. “A lot of these mutual fund companies are overlaying ETFs on top of mutual funds,” he said. “ETFs are lower cost, but they’re also just more liquid… So [among] RIAs that have traditionally been doing mutual funds — my guess is that has been increasing.”