Worldwide Exchange: ETF Flows Week of September 1

Key Concepts

• ETF market inflows
• Investor sentiment
• Diversification
• Relative value
• Inflation risk
• Real assets
• Natural resources
• Active ETF management
• Inflation beta
• Valuation

ETF Market Inflows and Investor Sentiment

• Net inflows into ETFs have reached $795 billion year-to-date, according to Vetify, putting the market on track for another trillion-dollar year.
• Tyler Rosenlike from Cohen & Steers believes ETFs are a continually growing part of the market.
• Cohen & Steers launched active ETFs in February of this year.
• The wealth distribution channels are more receptive to ETFs as a vehicle.

Top ETF Inflows and Investment Areas

• The GLD ETF (gold) saw the top inflows this week, which is not surprising given gold hitting all-time highs.
• Other ETFs with significant inflows include the VXUS (Vanguard Total International ETF) and the IWB (iShares Russell 1000 ETF).
• Investors are looking for relative value, diversification, and portfolio benefits.
• The US equity and credit markets have performed exceptionally well in the last couple of years, leading investors to seek opportunities in underperforming areas.
• Valuations around the world are more attractive than in the US.

Economic Outlook and ETF Picks

• The global economy is considered to be in pretty good shape.
• There is a concern that investors may be underestimating the risk of an acceleration of inflation.
• The recommendation is to have exposures in portfolios that can perform well in inflationary environments.
• Cohen & Steers is a leader in listed real assets.
• The Cohen & Steers Natural Resources Active ETF (CSNR) is recommended.

Cohen & Steers Natural Resources Active ETF (CSNR)

• CSNR provides exposure to equities that participate in the commodity economy.
• The ETF invests across the energy, agriculture, and metals and mining systems.
• Holdings include precious metals, copper producers, and energy producers.
• These businesses are expected to perform well when the economy is strong and when inflation is surprising.
• The natural resources industry has a high inflation beta.
• The ETF is actively managed.
• Valuations are inexpensive relative to broader equity markets.
• The ticker symbol is CSNR.

Inflation Risk and Portfolio Positioning

• There is a worry that Fed rate cuts could lead to a reacceleration of inflation.
• Investors should spend more time paying attention to exposures that can insulate portfolios from inflation and potentially generate good returns.
• Natural resources are well-positioned in this environment.

Conclusion

The ETF market is experiencing strong inflows, driven by investor demand for diversification and relative value. While the global economy is viewed as healthy, there are concerns about potential inflation risks. The Cohen & Steers Natural Resources Active ETF (CSNR) is recommended as a way to gain exposure to real assets and protect portfolios against inflation. The ETF invests in companies across the energy, agriculture, and metals and mining sectors, and is actively managed to capitalize on opportunities in the commodity economy.