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Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

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Barron’s Funds Quarterly+ (2025/Q2–July 7, 2025)

Barron’s Funds Quarterly+ (2025/Q2–July 7, 2025)
https://www.barrons.com/topics/mutual-funds-quarterly

(Performance data quoted in this Supplement are for 2025/Q2 and YTD to 6/30/25)

COVER STORY, “ETFs Are Eating the World. The Right – and Wrong – Ways to Invest”. It’s hard to imagine an investment idea or theme without a related ETF. There are 4,000+ ETFs in the US, 700+ were added just in 2024, and several hundred are pending before the SEC. Note that there are only 2,400 listed stocks in the US (but there are many ETFs for single-stocks). Many mutual funds/OEFs are adding ETF classes after Vanguard’s patent expired in 2023. Almost 1,300+ active ETFs are competing with active OEFs. Many new ETFs won’t survive because viable ETFs need $100+ million AUM. There have been strong inflows, and the total ETF AUM is $11 trillion, and almost 33.3% of all listed funds (OEFs, ETFs) excluding the money-market funds (CEFs are too tiny to move the needle). Lot of money is just shifting from OEFs into ETFs.

The ETFs has several advantages: (i) tax-efficiency (due to tax-free creation/redemption), (ii) accessibility, (iii) trading convenience, (iv) lower ERs; big ETFs are very liquid. Many financial advisors now prefer to use ETFs for asset allocation. On the other hand, there is more temptation to trade and reinvestments are inconvenient.

Top 4 ETF sponsors/firms (Vanguard, BlackRock/BLK, Invesco/IVZ, State Street/STT) have 82% of the total ETF AUM, so there is lot of noise out there. Major stock ETFs are SPY, IVV, VOO (SP500); RSP (equal-weight SP500), IEFA (EAFE), VT (total world stock), NOBL (dividend Aristocrats), TCAF (capital appreciation), etc. Major bond ETFs are AGG, BND (US aggregate bond); BNDW (total world bond), MUNI (intermediate-term munis), JCPI (inflation-protected), ANGL (fallen-angle HY), etc. Major alternative ETFs are GLD, GLDM (gold bullion); IBIT, FBTC (spot Bitcoin), etc.

There are flaws in some of these ETFs. Some bond, private-asset and commodity ETFs are in small, fragmented and illiquid markets that trade infrequently or not at all. The ETF pricing then is based on matrix-pricing or professional estimates/ guesses that may break down during market stresses. Most commodity ETFs hold futures because it isn’t practical to hold physical commodities except for some precious metals. This adds the complications of backwardation/ contango at future rolls. Also beware that ETFs can hold only up to 15% in private, illiquid assets, so pay attention to what the rest 85% is in. Then, there are leveraged ETFs, +/- 1x, +/- 2x, etc, often in pairs, so the firms make money whether investors have gains or losses.

QUARTERLY REVIEW. It was a wild quarter for leveraged ETFs as winners and losers were magnified. Beware that their stated leverage applies on a daily basis, but it diverges long-term. The broad market had an early-April drawdown but rebounded strongly to new highs. A solid advice is to think long-term and ignore short-term noises (political, currency, etc), but the entire credit for crypto rally belongs to this Administration that is also a player. Ordinary folks can join the fund with small amounts in ETFs IBIT, FBTC, etc. Foreign stocks (especially small-caps), gold-miners (finally joining the gold rally), bonds and market-neutral funds did well in Q2. Outflows from mutual funds/OEFs continued and went into ETFs. (By @LewisBraham at MFO)

More on FUNDS & RETIREMENT

The new budget may trigger AMT for more people in higher income brackets. The AMT exemption amount is the same (as in TCJA, 2017) but the phaseout level has been reduced and the phaseout is at a faster pace. Higher SALT deductions and high state and property taxes may trigger AMT. Expectations are that most couples with income under $400K won’t be impacted.

MFOP data for Q2 pending.
Top 5 Categories, Q2
Bottom 5 Categories, Q2

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