Core Insights - The Russell 2000 Index has shown only modest gains since the Federal Reserve lowered interest rates, indicating that investors may need to be patient for significant returns from smaller stocks [1] - The Neuberger Berman Small-Mid Cap ETF (NBSM) offers a blend of small and mid-cap stocks, potentially appealing to investors due to midcaps' historically lower volatility and superior return profiles [2][5] - NBSM is actively managed, which can be advantageous in the SMID-cap market where many companies are underappreciated and mispriced, allowing active managers to add value [3][4] Investment Strategy - Active management in the SMID space focuses on identifying quality companies while avoiding fundamentally flawed firms, which is challenging with broad-based small-cap indexes [4] - Approximately 50% of companies in the Russell 2000 are unprofitable and highly leveraged, making them sensitive to interest rate changes; NBSM's focus on quality can mitigate this risk [5] - NBSM is underweight in the healthcare sector, which is often reliant on low borrowing costs, and overweight in industrial stocks, suggesting potential benefits from increased defense and infrastructure spending [6] Market Outlook - Rate cuts could positively impact smaller stocks, with analysts projecting the small-cap index could rise by as much as 20% in the next 12 months, compared to an 11% increase expected for the S&P 500 [7]

Core Insights - The VettaFi Q3 Fixed Income Symposium occurred shortly after the Federal Reserve's first rate cut of the year, indicating a potentially favorable environment for investors [1] Group 1 - The timing of the symposium may provide insights into investor strategies following the recent monetary policy changes [1]

Core Insights - The digital asset market is evolving into a more diverse and institutionally engaged environment, emphasizing execution over mere exposure [1] - Recent trends indicate a significant shift in capital flows, particularly in U.S. spot ETFs, highlighting the importance of active management in a fragmented market [2][3] Market Dynamics - Innovation is outpacing index construction, leading to structural inefficiencies and cross-market dislocations, with macro conditions remaining stable [2] - U.S. spot Bitcoin ETFs have experienced notable capital rotation, with daily inflows and outflows reflecting active trading strategies [3] Investment Opportunities - Opportunities in the digital asset market require a multi-dimensional understanding of both traditional and digital assets, focusing on high-conviction strategies rather than sentiment-driven trades [4] - The expansion of crypto credit markets is creating differentiated opportunities for active managers to price risk effectively, particularly as fiat liquidity tightens [6]

Core Insights - The rapid increase in ETF strategies is complicating the process of identifying valuable options for investors [1][2] ETF Market Overview - In the first half of the year, exchange-traded funds attracted $540 billion in assets, with projections suggesting the number of ETFs in the US could reach 9,000 by this time next year [2] - The influx of new ETFs is creating challenges for investors to discern which funds are genuinely worthwhile [2] Trends Impacting ETF Investors - Major trends include significant inflows into low-cost funds, while higher-fee products are benefiting a select few early movers [3] - The fee wars may have reached a bottom, indicating a potential stabilization in pricing strategies [4] Performance of Different ETF Categories - Most inflows this year have been directed towards "non-traditional" funds, particularly synthetic income funds that utilize derivatives [5] - Other successful categories include leveraged and inverse ETFs, as well as buffered products, with issuers like First Trust and Innovator generating substantial revenue [5][6] Revenue Dynamics - A small number of expensive funds contribute disproportionately to revenue, with firms like JPMorgan and Toroso Investments leading in the synthetic income segment [7]

Core Insights - A significant majority of workplace plan sponsors, 80%, believe that active management can consistently outperform the market, while 86% agree that actively managed target date funds can mitigate volatility for participants [1][5] - Despite the optimism from plan sponsors, advisors express skepticism regarding the long-term effectiveness of active management, citing that it rarely delivers sustainable outperformance [3][4] Group 1: Active Management Perception - BlackRock's research indicates that active management is perceived as a valuable approach for uncovering value, managing risk, and adapting to market changes, although these benefits are not consistently realized for retirement investors [2][4] - A survey of 1,300 plan participants revealed that 80% are interested in using actively managed funds for their retirement savings, indicating a strong demand for such products despite the skepticism from advisors [5] Group 2: Performance Data - In 2024, 65% of actively managed large-cap U.S. equity funds underperformed the S&P 500, and this figure increases to 84% over a 10-year period, highlighting the challenges of achieving consistent outperformance in public markets [4] - The SPIVA U.S. Scorecard shows that after fees, at least 80% of equity funds and over half of fixed-income funds lagged their benchmarks over the 10-year period ending December 31, 2024 [5] Group 3: Cost Considerations - Advisors emphasize that investors often lack a clear understanding of active products, which typically come with higher costs that can erode long-term returns [6] - The irony noted by advisors is that in attempting to protect participants from market volatility, plan sponsors may inadvertently implement strategies that result in lower retirement savings [6]

Core Insights - Short-term bond funds have outperformed the core index, making them a favorable alternative during periods of persistent inflation, with an average return of 5.10% over the past year [1] - Over the last three years, short-term bond funds returned an annualized rate of 4.77%, compared to the Morningstar US Core Bond Index's return of 2.69% [2] Performance Comparison - The Morningstar US Core Bond Index has returned 2.54% over the last 12 months, 2.69% annually over the last three years, and has lost 0.73% annually over the last five years [2] - The selected short-term bond funds were chosen based on their performance over one-, three-, and five-year periods, all exhibiting active management [2] Active Management Importance - With the U.S. Federal Reserve's divided stance on interest rate policy, active management is crucial for bond exposure [3] - Vanguard offers two active short-term bond funds that are recommended for consideration [3] Fund Characteristics - The Vanguard Short Duration Bond ETF (VSDB) is designed for fixed income investors seeking to maximize yield while remaining in investment-grade debt, mitigating interest rate risk and price volatility [4] - VSDB has a low expense ratio of 0.15%, making it competitive with passive fund peers [5] Municipal Bond Option - The Vanguard Short Duration Tax-Exempt Bond ETF (VSDM) provides a blend of yield and credit quality for those interested in active short-term municipal bond exposure [6] - VSDM offers federal tax-free income and has an even lower expense ratio of 0.12% [7] Expertise Leverage - Both VSDB and VSDM leverage the expertise of the Vanguard Fixed Income Group, which has been managing active funds for nearly 50 years [8]

Core Viewpoint - Sprott Inc. has launched the Sprott Active Metals & Miners ETF (METL), an actively managed ETF aimed at long-term capital appreciation by investing in companies across the metals and mining industry lifecycle, including miners, recyclers, and royalty and streaming companies associated with high-demand strategic metals [1][2]. Investment Strategy - METL employs a value-oriented and contrarian investment strategy, focusing on undervalued companies with strong long-term fundamentals or growth potential that are currently out of favor with investors [2]. - The investment team combines top-down sector analysis with bottom-up stock selection, leveraging decades of collective experience in the metals and mining industry [2]. Management Team - The investment team is led by Senior Portfolio Manager & Economic Geologist Justin Tolman, along with other experienced professionals including Maria Smirnova, Shree Kargutkar, and Victor Huwang [2]. Market Positioning - Sprott's investment team conducts around 200 management meetings annually within the mining sector and performs up to 30 mining site visits to assess asset potential and identify challenges [3]. - The ETF aims to create a dynamic portfolio of essential materials miners, including those involved in copper, uranium, silver, steel, and lithium, which are critical for energy independence and national security [3]. ETF Features - METL combines the benefits of active management with the flexibility of an ETF, offering daily transparency, liquidity, and potential tax efficiency [3]. - It is part of Sprott's expanding portfolio of ETFs, which includes various other specialized funds targeting precious metals and critical materials [3][4]. Company Overview - Sprott is a global asset manager focused on precious metals and critical materials investments, with a strategy that includes Exchange Listed Products, Managed Equities, and Private Strategies [6]. - The company operates offices in Toronto, New York, Connecticut, and California, and is listed on both the New York Stock Exchange and the Toronto Stock Exchange under the symbol SII [6].

Investment Strategy - Index funds consistently outperform active management in the long run [1] - Index funds are a more viable option for retirement saving success [1]

ETF Market Overview - ETF net flows are over $789 billion year to date [1] - Investors are slightly buying the dip on the Triple Q's following Nvidia earnings [2] ETF Inflows - Vanguard Information Technology Index Fund (VGIT) saw the top inflows this week [2] - iShares Russell 2000 ETF (IWM), representing small caps, experienced significant inflows [2] - Investment grade corporate bond ETF (LQD) also saw substantial inflows [2] Active Management & JGRO ETF - JP Morgan suggests active management with the JGRO ETF, emphasizing bottoms-up research and individual stock valuation [3] - JGRO ETF focuses on large-cap growth, considered a suitable strategy in an environment driven by a few key stocks [3] - JGRO ETF is up double digits year to date, performing closely to the S&P 500 [4]

KATIE: WELCOME TO "BLOOMBERG ETF IQ." I'M KATIE GREIFELD. SCARLET FU IS OFF TODAY. MORE THAN $17 TRILLION ETF INDUSTRY, WE START WITH THE STOCK RALLY JUMPSTARTED BY FED CHAIR JEROME POWELL IN JACKSON HOLE.LOSING A BIT OF STEAM THIS MONDAY AS WE CLOSE OUT THE LAST WEEK OF SUMMER. MEANWHILE, RAPID GROWTH IN ACTIVE ETF'S, EVEN AS -- WE WILL SPEAK ABOUT IT WITH CAP COMING -- AND LIKE MATT CAMUSO OF BNY INVESTMENTS. WE WILL ALSO SPEAK WITH GREG KING, THE CEO OF REX FINANCIAL, ABOUT HIS NEWLY LAUNCHED ETF.ALL THA ...