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New momentum for old products

Calling 2024 a banner year for ETFs would be like saying Warren Buffett is an above-average investor.  

The exchange-traded fund industry is closing out its best year ever by a landslide. With just over two weeks to go, ETFs have seen $1 trillion of inflows year-to-date. 

That comes out to a cool $4 billion a day. 

To be clear, three-decade old products typically do not see numbers like that. Yet, high-profile Wall Street veterans including GMO’s Jeremy Grantham, BlackRock’s Rick Reider, and Fundstrat’s Tom Lee all helped draw attention to the industry with splashy launches this year. 

Plus, Scott Bessent — president-elect Donald Trump’s nominee for Treasury Secretary — is currently scheduled to launch an ETF in the coming weeks.

Separate data from London-based consultancy firm ETFGI showed the global ETF industry now encompasses a record $15.12 trillion in assets as of November, marking a 30% increase year-to-date. 

Those inflows tie in with the volume of new products that have hit the market, with companies debuting 666 total products so far in 2024, according to Bloomberg Intelligence’s senior ETF analyst Eric Balchunas, who I spoke with Thursday at the ETF In-Depth conference in New York.  

“This is probably as good as it gets for a market in a year,” Balchunas said.

Balchunas shared data that showed Vanguard’s S&P 500 fund, VOO, saw a record $100 billion of inflows this year. iShares’ S&P 500 ETF, IVV, came in second with $59 billion — and both of them surpassed the prior record of $50 billion seen in 2023. 

Meanwhile, crypto stayed top of mind at the Bloomberg conference. The digital assets have played a key part of the ETF momentum, with firms from BlackRock and Fidelity to Cathie Wood’s ARK Invest all launching spot ETFs for bitcoin and ethereum. 

“Bitcoin ETFs broke every conceivable record out there,” Balchunas said. “They are already at 1.1 million bitcoin held. They just passed Satoshi [Nakamoto] as the biggest holder of bitcoin on the planet.”

iShares Bitcoin Trust ETF (IBIT), for one, reached $50 billion in assets under management in 227 days — a record that Balchunas doesn’t anticipate ever being broken. 

For context, the second-fastest ETF took five times as long to reach the same milestone. 

“We’re really just at the tip of the iceberg with bitcoin and especially ethereum,” Jay Jacobs, head of thematic and active ETFs at BlackRock, said at the conference. “Just a tiny fraction of our clients own [bitcoin and ethereum], so that’s what we’re focused on.” 

Looking ahead, the Bloomberg Intelligence team forecasts the global ETF industry to grow to $35 trillion by 2035, representing a 10% compounded annual growth rate. 

November was the 66th consecutive month in a row of net inflows for global ETFs, per data from ETFGI.

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Elsewhere:

🔔Trump rang the opening bell at the NY Stock Exchange. He did it the same morning TIME Magazine named him Person of the Year. The crowd at the exchange included Goldman Sachs’ David Solomon, Citigroup’s Jane Fraser, Pershing Square’s Bill Ackman, and Verizon’s Hans Vestberg, among others. The Dow, though, dropped for a sixth day in a row. (CNBC)

🏦Rule changes are coming to bank overdraft fees. The Biden administration is overhauling rules for how financial firms can charge customers. The Consumer Financial Protection Bureau said banks have three options: charge a flat $5 overdraft fee, cap the fee at a level that covers costs and losses, or charge any fee but disclose the overdraft loan terms. (WSJ)

⚡️Nvidia has ramped up hiring in China. The company added roughly 200 staffers to its Beijing headcount in its latest research and development push, according to Bloomberg. The AI leader has long sought to develop autonomous car technology. The world’s second most valuable company will finish the year with about 4,000 people. (Bloomberg)

Rapid-fire:

• US producer prices increased in November by the most in five months, with egg prices surging (Bloomberg)

• Warner Bros. Discovery stock climbed double-digits after announcing a restructuring plan for its streaming business (CNBC)

• BlackRock says investors should allocate 1-2% of their portfolio to bitcoin (Business Insider)

• The European Central Bank plans to cut interest rates by a quarter point in January and likely also in March (Bloomberg)

• Adobe stock dropped 14% Thursday following soft revenue guidance (CNBC)

• The US dollar’s recent strength has sparked the biggest fall in emerging market currencies in two years (FT)

• The governor of New York wants to hand out $3 billion and bring back inflation (Pomp Letter)

• The World Gold Council forecasts a “much more modest” year for gold in 2025 (Investopedia)

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