Harry Whitton is Head of ETF Sales Trading at Old Mission.
What surprised you in 2022?
In a year that saw almost every asset class down double digits, new assets into ETFs did not slow down. Net new inflows into ETFs were over $500 billion while mutual funds saw nearly $1 billion in outflows. And this doesn’t include conversions of mutual funds into ETFs!
What was the highlight of 2022?
For Old Mission, the highlight was our continued growth as a leading ETF and ADR market maker, providing onscreen liquidity and direct quotes to institutional clients.
For the ETF industry, in a year of negative returns, ETFs continued to see the expansion of use by more and more counterparties. We had many discussions around tax loss harvesting with clients and moving assets out of one product type into a comparable ETF product.
What trends are getting underway that people may not know about but will be important?
Using ETFs with an option strategy has been around for years, but 2022 was the year they finally started to get recognized, and they will only grow in 2023. The industry saw substantial growth with buffer products from firms like Innovator, First Trust and Allianz. In addition, buy-write products had fantastic returns, and you cannot overlook JPMorgan’s JEPI. The options overlay product brought in over $12 billion in net new dollars this year, making it one of the most successful ETFs in 2022.
What are your expectations for 2023?
The launch of even more buffer and options products from other ETF issuers. More mutual funds being converted to ETFs and more traditional mutual fund firms entering the ETF arena. With yields rising, bond ETFs will become more and more attractive. We also need to watch for a potential recession, and look at areas like energy, health care and financials that tend to do well during these times.
What to watch in 2023?
I think one interesting thing to watch will be the expiration of Vanguard’s ETF share class patent in May. Will other mutual fund issuers try to add the option to their fund lineup? They will need exemptive relief from the SEC to do so.
If you could step back to January 1st, is there something you would do differently.
The saying goes that there is an ETF for everything, and if I could turn the clock back, I would have bought TTT (ProShares Ultra Pro Short 20+ Treasury) up over 100% YTD. I would have sold Bitcoin back at the beginning of the year when it was trading near $50,000. I also would love to go back and put money in Simplify’s Rate Hedge product PFIX, SARK (Short Innovation ETF), SOGU (Short SPACs ETF) as all were up over 70% in 2022.
