23 ETFs for 2023

Episode Summary

Executive Summary: The episode surveys 23 ETFs to watch in 2023, focusing on structural changes, niche product launches, and market dislocations. The hosts and guests highlight ETF share-class patents expiring, Russia ETF unwinds, crypto litigation and discounts, factor/fundamentals-driven strategies, active ETF growth, bond innovation, single-stock ETFs, and politically themed funds—framing 2023 as a year of product evolution and cleanup rather than pure growth.

Main Topics: ETF structure and Vanguard’s share-class patent expiry (Priority: 5/5): James Seifert argues VTV is worth watching because Vanguard’s patented ETF share-class structure expires in May 2023, potentially opening a new route for other asset managers to adopt the model. Russia ETF unwind and frozen assets (Priority: 5/5): Athanasios Seraphagus says halted Russia ETFs like RSX will likely enter an unwind/liquidation phase in 2023, with spillover effects on emerging market ETFs that still hold Russia exposure. Crypto vehicles, GBTC discount, and litigation (Priority: 5/5): James emphasizes GBTC’s extreme discount to NAV and the legal push to convert it to an ETF, along with broader questions about post-FTX crypto product demand. Fundamentals and quality regain favor (Priority: 4/5): Eric Balchunas and Athanasios both argue that 2023 should favor cash flow, profitability, and quality-focused ETFs after the growth/meme-stock era faded with Fed tightening. Active ETF expansion and tax efficiency (Priority: 4/5): Several picks highlight active ETFs—especially Matthews China Active ETF and Avantis products—as examples of using ETF wrappers to improve tax efficiency and capture flows. Single-stock, single-bond, and other niche innovation (Priority: 4/5): The episode covers experimental products such as TSLQ, U10, and high-yield niche bond ETFs, assessing whether precision instruments can gain traction or remain novelty products. Political and thematic ETFs, plus industry ecosystem plays (Priority: 3/5): The discussion touches on anti-ESG, K-pop, Top Gun, and ETF-industry-related strategies, showing how branding, politics, and the ETF ecosystem itself are becoming investable narratives.

Key Arguments: The Vanguard ETF share-class structure may become more widely copied once the patent expires, even if the near-term impact is uncertain. Russia ETF closures/unwinds are likely a major 2023 story because investors remain trapped in halted products and because Russia exposure still sits inside broader emerging market ETFs. GBTC’s discount to NAV creates both risk and opportunity, but the real story is the legal fight to convert it into an ETF and the many related lawsuits and redemption proposals. The market environment now rewards companies and funds with cash flow, profitability, and balance-sheet resilience rather than speculative growth. ETF wrappers are especially valuable for active strategies because they can reduce capital gains distributions compared with mutual funds. Single-stock leveraged/inverse ETFs have not attracted broad demand in the U.S. because leverage is limited, making them more of a tactical trading tool than a mass product. Niche thematic launches may face a wave of closures in 2023 as the market purges weaker, smaller, and more novelty-driven funds. Bond ETFs remain an area of innovation, with precision products like single-bond or on-the-run Treasury funds potentially offering useful trading and liquidity tools.

Data Points: Vanguard patent expiry: May 2023 - The ETF share-class patent underpinning VTV expires then. Russia ETF halt duration: Nearly a year by March 2023 - RSX and other Russia-related ETFs remain frozen/halted. GBTC discount: 49% record closing discount; over 50% intraday - GBTC traded far below the value of its Bitcoin holdings. GBTC hypothetical return: 100% if discount closes from 50% to 0% - Buying at a 50% discount doubles if NAV convergence occurs. Cash cows flows rank: Top 20 of flows - Pacer’s COWS had a strong year and spawned multiple sequels. Strive assets: Half a billion dollars - The anti-ESG issuer already amassed notable assets. Matthews China Active ETF launch: April of the prior year - MCH was launched as an ETF wrapper around an active China mutual fund strategy. Avantis small cap value flows: Four times more flows than peers - AVUV outpaced Vanguard and BlackRock competitors in its category. AVUV fee: 25 basis points - Used as an example of low-cost active management. Avantis U.S. fund fee: 15 basis points - Referenced as part of Avantis’ low-cost lineup. Avantis EM fund fee: 33 basis points - Referenced as part of Avantis’ low-cost lineup. Single-stock ETF count: About 25 listed; 80-90 filed - James describes the size of the single-stock ETF space. TSLQ assets: $65 million - The inverse Tesla ETF was highlighted as a relative hit. TSLQ trading volume: Over $100 million per day - Eric notes sustained heavy trading in the product. TSLQ recent performance: Up 88% in the past three months - Used to explain why the fund is drawing buyers. Top Gun ETF fee: 98 basis points - The AXS Brendan Woods Top Gun Index ETF was cited as expensive for a concentrated active strategy. Top Gun ETF holdings: 27 stocks - The fund is highly concentrated. VXUS outflow days: 3 days since 2011 launch - Vanguard’s ex-U.S. total market fund has had almost no outflows. ETF industry trading volume: About $50 trillion in shares traded this year - Used to justify an industry/ecosystem-focused ETF idea. Hong Kong crypto ETFs assets: About $80 million - Rebecca Sin’s Asia notes on early crypto ETF uptake.

Pivotal Quotes: "In May of 2023, that patent expires." — James Seifert: Explaining why Vanguard’s ETF share-class structure is a key watch item. "This is a roach motel you got in and you can't get out" — Athanasios Seraphagus: Describing investors trapped in halted Russia ETFs. "The future isn't scary. Not realizing its potential, however, could be." — Sponsor copy: Opening ad copy for Invesco QQQ that frames the episode’s theme of investing in future innovation.

Implications: 2023 looks like a year of ETF maturation: legal and structural experiments may proliferate, but weak themes could get washed out. Investors should watch for tax-efficient active funds, bond precision tools, crypto litigation, and unwinds of legacy positions like Russia exposure.