ETFs continued to gather strong inflows in the first half of the year as investors turned to fixed income and global equity ETFs.
According to data from ETFbook, UCITS ETFs saw $82bn inflows in H1 as risk-on assets shot the lights out amid peak inflation expectations.
However, the banking crisis in March and current overconcentration risk among indices such as the S&P 500 and Nasdaq 100 show cracks are starting to appear in the financial system.
From CoCo bond ETFs and Michael Burry to the ‘Big Three’s’ engagement record, here are the five most-read stories on ETF Stream in H1.
1. BlackRock, Vanguard and State Street have ‘among the strongest’ incentives to engage
Research by the National Bureau of Economic Research (NBER) found the ‘Big Three’ of BlackRock, Vanguard and State Street Global Advisors (SSGA) have just as much incentive to engage as active managers because they are the largest shareholders of most companies, especially in the US.
For example, the research found passive funds were 9.5% more likely than active funds to vote with company management on issues such as director elections.
“The empirical evidence appears to be consistent with this conclusion: the Big Three perform substantially more governance research and vote more independently from proxy advisers compared to smaller passive funds.”
2. Big Short’s Michael Burry calls second ‘inflation spike’
At the start of 2023, Michael Burry, the hedge fund manager in Michael Lewis’s book The Big Short, warned there will be a second spike in inflation in H2 as the Federal Reserve stops tightening monetary policy too early.
While the forecast is yet to come to pass, the US central bank paused any further rate hikes at its latest Federal Open Market Committee (FOMC) meeting in June. “The Fed will cut and government will stimulate,” Burry said. “And we will have another inflation spike. It is not hard.”
3. CoCo bond ETFs plummet as $17bn Credit Suisse AT1s wiped out
Contingent convertible (CoCo) bond ETFs recorded double-digit losses following news $17bn of Credit Suisse’s Additional Tier 1 (AT1) debt had been written off as part of UBS’s rescue deal of its Swiss rival.
The decision caused much controversy due to the breach in hierarchy by paying equity holders before AT1 investors who filed lawsuits against Swiss regulator Finma for its actions.
4. VanEck launches uranium and nuclear ETF
In February, VanEck expanded its thematic range with the launch of an ETF targeting the uranium and nuclear energy industries, ETF Stream revealed.
Tracking the MarketVector Global Uranium and Nuclear Energy Infrastructure index, the VanEck Uranium and Nuclear Technologies UCITS ETF (NUCL) will offer exposure to 25 companies involved in the space or offering exposure to spot uranium.
5. Revolut launches ETF trading platform in Europe
Revolut partnered with Berlin-based fintech Upvest to launch an ETF trading platform for retail investors across Europe.
Customers of Revolut Securities Europe UAB will be able to access 158 ETFs for as little as €1 via its fractional shares offering.
