21 ETFs to Watch in '21

Episode Summary

Executive Summary: Bloomberg’s Trillions episode presents 21 ETFs the hosts are watching for 2021, using them as a lens on major market themes: Bitcoin access, international lag, ESG, options-based income strategies, retail trading, convertibles, thematic innovation, cannabis, active non-transparent funds, and fixed income’s resurgence. The discussion emphasizes that these are not buy/sell calls but indicators of where investor attention, product design, and market structure may evolve next year.

Main Topics: Bitcoin access and the GBTC/BTC ETF debate (Priority: 5/5): James spotlights Grayscale Bitcoin Trust (GBTC), arguing that rising Bitcoin demand and the premium to NAV highlight the need for a true Bitcoin ETF, which could eventually convert GBTC into a much larger ETF vehicle. Thematic and retail-driven equity products (Priority: 5/5): Several picks reflect retail enthusiasm and thematic investing, including TQQQ, QQQJ, SPAK, ARKK, and iBuy, showing how branding, trading activity, and concentrated themes are shaping ETF flows. Factor and portfolio construction shifts (Priority: 4/5): The team highlights products like VXUS, SPGP, USMV, SVAL, and DFAU to test whether investors rotate into international stocks, value-light growth, low vol, or transparent active strategies after a decade dominated by U.S. growth. Alternative income and structured strategies (Priority: 4/5): OVL, SPYC, and especially LQD illustrate the rise of overlay, options-based, and bond-like ETF strategies as investors seek yield replacement and new ways to manage risk in a low-rate environment. Sector-specific growth themes (Priority: 4/5): Morgan’s picks—ICVT, KMED, BATT, and Net Netl—focus on convertibles, emerging markets healthcare, battery/lithium supply chains, and triple-net REITs as targeted ways to express macro and demographic trends. Cannabis, innovation, and active management (Priority: 4/5): MSOS and ARKK represent high-conviction thematic bets, while FDG and DFAU test whether non-transparent or low-cost active ETFs can gather assets in a crowded market.

Key Arguments: Bitcoin demand is strong enough that the market is already paying a large premium for an imperfect product like GBTC, suggesting the absence of a U.S. Bitcoin ETF is a market inefficiency. International equities may be positioned for a catch-up trade after a decade of U.S. outperformance, making VXUS a useful indicator of rotation. ESG can be implemented as an exclusionary S&P 500 overlay without radically changing core risk/return characteristics, which is why such products may attract advisor assets. Options-overlay and buffer-like products are growing because low rates and fear of a 60/40 portfolio’s limitations are pushing investors toward yield and downside management. Retail trading and tech strength helped leveraged Nasdaq products like TQQQ become major trading vehicles, and that behavior may persist or fade as pandemic conditions normalize. Convertible bonds offered unusually strong equity-linked upside in 2020, making ICVT a notable fixed-income substitute for investors who still want a bond allocation. QQQJ makes sense as an extension of the Nasdaq franchise because it captures the next 100 non-financial Nasdaq names and overlaps with themes like 5G and streaming. Emerging markets healthcare could benefit from structural demographic and healthcare-spending growth, especially in China, South Korea, Hong Kong, and India. Battery and lithium demand is evolving from a pure miner play to a broader battery ecosystem, which BATT’s index shift attempts to capture. Low-volatility ETFs like USMV may struggle when markets are rallying hard and investors chase beta, but could regain relevance in a regime shift. Active non-transparent ETFs (ANTS) will be judged by whether they can gather assets and sustain outperformance despite limited daily holdings disclosure. LQD’s rise shows investment-grade bond ETFs have become critical liquidity tools and quasi-bond dealers, especially after the Fed bought ETFs during the March selloff.

Data Points: Bitcoin trust market cap: About $14 billion - GBTC’s size as Bitcoin approached all-time highs GBTC premium to NAV: Roughly 30% - Friday close cited as investors paying a premium for access Domestic stocks vs international stocks: 190% outperformance over 10 years - Used to frame why VXUS is being watched for potential catch-up VXUS outflows: Only 3 days of outflows in 10 years - Illustrates persistent investor inflows into international equities TQQQ trading volume: Almost $4 billion a day - Shows the scale of retail and thematic trading in leveraged Nasdaq exposure Convertible bond issuance: About $117 billion on track for the year - Backdrop for ICVT and the booming convertibles market ICVT 2020 performance: About 53% up - Demonstrates unusual strength for a bond ETF QQQJ assets: $355 million - New Nasdaq Next Gen ETF at the time of discussion KMED country exposure: 30% China, 22% South Korea, 13% Hong Kong, 13% India - Shows the fund’s tilt toward higher-growth emerging markets BATT strategy change: Lithium miner exposure down 10%; energy storage makers added 16% - Index conversion and broader battery lifecycle exposure Net Netl yield: Around 4.4% - Higher-yield profile of triple-net lease REIT exposure USMV underperformance: Lagging the S&P by 12% in 2020 - Explains why low-volatility funds saw outflows SPAC market fundraising: About $70 billion raised in 2020 - Context for the SPAC ETF and thematic investor interest ICVT ETF assets: Over $1 billion - A notable size for a niche convertibles strategy LQD assets: Rose from $28 billion to $57 billion - Asset growth after the March selloff and Fed support ARKK performance: Up 500% since inception and 133% in 2020 - Used as evidence of Cathie Wood’s momentum and star status MSOS vs MJ performance: MSOS up 43% vs MJ up 30% - Highlights the benefit of U.S.-focused cannabis exposure

Pivotal Quotes: "The future isn't scary. Not realizing its potential, however, could be." — Invesco QQQ ad copy: Opening sponsorship message setting a forward-looking tone "We do not give investment advice. So this is not ETFs we think will go up or down. It's ones that we as analysts just keep thinking about and we're fascinated by." — Eric Baltunis: Defines the episode’s purpose and how the 21 ETFs were selected "This is sort of the new bond dealer." — Eric Baltunis: Describing LQD’s role as liquidity tool and trading instrument in fixed income markets

Implications: The episode suggests 2021 ETF competition will center on product innovation, liquidity, and thematic packaging. Investors may increasingly choose ETFs as tactical expressions of macro views, while issuers battle over transparent active, crypto access, and bond-market utility.