Jillian DelSignore on Record ETF Inflows Shaping NDX Demand

SPEAKER_1 (0:00)

Thanks so much, Sam. Joining me now here in studio is Jillian DelSignore, the Head of Investor Distribution Insights over at Nasdaq Indexes. Jillian, great to have you back with us. We've finished our third quarter. We have broken a full year record in terms of flow through US listed ETFs. We're already at $1.54 trillion just through the first three quarters. We talk a lot about this extraordinary demand and this move that we're seeing into ETFs, and more and more regularly Sam and I are having these conversations.

What is driving this continued flood into the ETF wrapper in space?

Jillian DelSignore (0:40)

I think we continue to see a couple of things. One is new investors. We're continuing to welcome, hard to believe, this late into the game of the ETF game. More investors continue to come in and many of them are retail. We're seeing more and more. I was just at a conference called Future Proof. The Future Proof Fest, I recommend it. I was on the beach for three days in Huntington Beach, California, outside. It's lovely.

And every ETF issuer that I talked to, in all seriousness, was asking about retail. Every issuer is trying to figure it out. How do I reach retail? Where do I reach retail? What do I reach them with? They're recognizing this really surge of demand for ETF, ETF education content from the retail investor and this sophistication of the investor to embrace strategies like derivative income that we've seen huge demand for. We're actually writing a paper on that right now that I can come in and share at a later date, but this demand for some of these more sophisticated strategies from retail. And so ETF Fisher is trying to figure out how to meet that. So I think that's a huge part of what we're seeing. And ongoing product development, right? Just when I think we can't push the wrapper any further, we do it.

And so we're continuing to see new product development, reaching out to meet investor demand, and that is leading us to these all time highs. I mean, I'm ready to, I don't know what to expect in the fourth quarter because the fourth quarter tends to be the biggest of all. And so here we are already at a record and we're about to enter our biggest quarter traditionally. So very curious to see how the year wraps up.

SPEAKER_1 (2:03)

And so as we look at just the month of September and we're getting this data right as we just got our Schwab Trader Activity Index data. And it was the first time, you may not have had a chance to read it yet, we had an ETF as the top net buy. Five of the top 10 net buys for the month were ETFs. And so as I look at September flows alone, they brought in $150.6 billion.

So I want to talk about these two things hand in hand here. What are you seeing in terms of trends of investors trying to increase their equity exposure? Is there something more structural perhaps happening in how we're using ETFs now that we're starting to see them show up in the place of where we used to see these heavy headline driven single stock names?

Jillian DelSignore (2:49)

So I think you have sort of this barbelling effect. So you have advisors in the middle, this is what I sort of think about, and they've been users of ETFs while evolving over time, right? Been users of ETFs.

You have institutions on one side and retail on the other, and I think you're seeing increase in usage by both of those ends. I think retail is becoming more educated on this benefit of diversification. Yes, you can buy single stocks, but you can actually get that exposure and more through buying the ETF wrapper. It can come with tax benefits, cost benefits. Again, just pure diversification benefits from a portfolio construction perspective. I think the education of retail and sophistication of retail is really driving a lot of that. Then you have institutions on the other side. I know when I was in my time at BlackRock and covering asset managers, there was so many conversations about cash equitization. How are they utilizing ETFs? Some that have looked like capital markets vehicles. You have some of the most heavily traded, which I'm sure are falling at the very tip top of that list. Some of these ETFs that trade such heavy volume, they act like derivatives. They act as capital markets vehicles. You're seeing some very sophisticated institutional traders utilize ETFs in place of those trades. I think you're really seeing, not that you're not seeing uplift in the wealth space, you're seeing uplift on both ends of that barbell, and it's driving a lot of flow.