The market may be entering a new phase marked by the reevaluation of overcrowded 'non-traditional' strategies within exchange-traded funds (ETFs). Mike Akins, founding partner of ETF Action, argues that not every asset integrated into ETFs, particularly private assets, is well-suited for this format and warrants closer examination.
'The ETF wrapper is just more efficient for a lot of things. Not everything,' Akins remarked during an appearance on CNBC's 'ETF Edge' this week. He noted, 'I always say I'm an ETF first type of guy, but I'm not an ETF only.'
Akins suggests that the current situation is less about the ETF structure itself and more linked to global trends. Investors are presently more enthusiastic about getting exposure to real asset themes, such as infrastructure projects and industrial reshoring, rather than technologies like artificial intelligence.
'The ability to get [an] ETF to market has become very mainstream. It's super easy if you have the right provider or partner,' Akins stated. 'So, I think the investor is going to drive that next theme based on the market.'
Akins anticipates that this will drive innovation in ETF products—an evolution that could yield positive results or potential pitfalls.
'There is always that little bit of performance chasing that occurs, and sometimes by the time the themes reach the market, the trade has already run its course,' Akins explained. 'But there's no reason to think that within the ETF space we're going to run out of innovation.'