Buffers Are In, Fee-Slashing Is Out, and More ETF Predictions for 2025

THINKADVISOR: What are your thoughts on Vanguard’s recent move to lower fees on 87 funds, including ETFs?

TODD ROSENBLUTH: Vanguard right now is the second-largest ETF provider. They've been punching above that weight and gathering assets in their products across a range of different ETFs.

To me, it's less of a conscious decision that the firm is becoming more aggressive in the ETF marketplace and is more the result of ETF adoption, and the way that Vanguard's products are set up, that as more money goes in, the fees get reduced.

There could very much be a spillover effect, where we see some of Vanguard's peers in the space bring fees further down. But this is as much a success story for the ETF industry in that more money has gone into these products, and as a result of the scale, Vanguard has been able to bring its fees down.

I don't expect we're going to see aggressive fee-cutting from Vanguard's peers, because if they're an index-based provider, the fees are largely low. I think we will see some fee reductions industrywide, but the difference between 6 basis points and 5 basis points … few people are going to be selling out of one fund to buy another just for the fees.

How do you see the competitive landscape overall among the big three ETF providers?

What's notable to me also is what Vanguard did not do. Vanguard did not cut the fee for the Vanguard S&P 500 ETF (VOO). Vanguard is poised to be the largest of S&P 500 ETFs (after State Street Global Advisors’ and before iShares’ rival index funds).

So not that Vanguard needed to cut its fee in order to overtake SPY, but it is likely to be becoming a larger product. Most of the products that Vanguard cut the fees on, they are unique in offering. The fees matter more when the products are the exact same thing.

What are your thoughts on what’s happening with crypto?

We're just past the one-year anniversary of the first spot bitcoin ETFs. They've been extremely popular, and now that we're in 2025, they remain popular, and there's expectations that the Trump administration and the regulatory bodies are going to be more supportive of cryptocurrency than the prior administration.

Time will tell if that is the case, but what we've seen also this year that's interesting to me is we have products from firms like Calamos and Innovator ... that are providing exposure to cryptocurrency (bitcoin), but in a risk-reducing manner.

These new products from Calamos and Innovator are combining crypto exposure in a buffered manner. So to give some upside exposure with downside protection is likely to appeal to some advisors that have held off putting money into crypto because of the volatility.

What’s happening with buffered ETFs more broadly?

For a variety of different investment styles, there's now a way of either having downside protection through buffered strategies or options-based ETFs that are more covered calls, that are providing income generation, which offers some downside protection but is more of an income generator. And we've seen a firm like NEOS expand their lineup recently.

They have their own covered call, bitcoin-related product. … So we've seen strong interest in covered call products the last few years. The supply of products continues to expand to meet that demand.

What trends are you seeing with index funds?

Providing exposure to quality or value or dividends is a factor-based approach. We've seen products in the last couple of years from VictoryShares, from Franklin Templeton, that are attempting to do a smarter way of giving exposure. So VictoryShares, for example, has a free-cash-flow suite of products which have a growth filter. … And they recently expanded their lineup in the last year.

Franklin Templeton launched a couple of dividend multiplier index-based ETFs that take a smarter way of getting diversified exposure, and doing things on a stock-by-stock basis, to look for companies that pay the dividend and can continue to grow that dividend. So the Franklin U.S. Dividend Multiplier index ETF is one of those examples.

What’s happening in the active ETF arena?

That's where we've seen most of the product development happening in the ETF industry as of late. We have a number of new entrants that have come into the marketplace in recent months. Firms like MFS, which launched the first mutual fund that's a hundred years old. We saw Cohen & Steers launch ETFs. Recently we have Tweedy Browne that launched its first ETF.

These are all brands that are well known by financial advisors for active mutual funds. They've now entered the ETF marketplace. Just today, BlackRock converted an actively managed mutual fund with more than a billion dollars into an ETF (HIMU, an active high-yield muni ETF).

Then we have firms that are coming. So Lazard and Raymond James Investment Management are likely to be launching their first ETFs in the second quarter.

What other ETF trends do you anticipate this year?

State Street, the third-largest ETF provider, has filed regulatory paperwork to start the process to get approval to launch a private credit ETF. (The industry’s first private credit-related ETFs were launched late last year.) They have filed to launch an ETF in partnership with Apollo. State Street has also filed for a hedge fund-like ETF in partnership with Bridgewater Associates.

Both firms, Apollo and Bridgewater, are leaders within their respective fields and bring a lot of institutional expertise. So we're focused, we're hopeful that we're going to see these products come to market, and I think hedge fund-like strategies and private credit are going to be areas of focus in 2025 if these are approved.

State Street has increased its focus on innovation; they're looking to bring novel products to the marketplace. I think they're a firm to watch from an innovative ETF standpoint.

Will you expand on fixed income ETF trends?

We saw record inflows to fixed income ETFs in 2024. We've seen strong demand in 2025. … We're seeing increased focus on actively managed ETFs.

We've seen really strong interest in the CLO marketplace, the collateralized loan obligation marketplace. Janus Henderson has the largest and most successful of those products, JAAA. But we've seen lots of other firms enter the marketplace or have some success in bringing such products to market.

Will you talk about 60% stock, 40% bond portfolio products?

There's no room for an alternative asset class in that narrow (60/40) bucket of products, but we're seeing more and more advisors carve out a slice for alternatives, including bitcoin, and having a percentage or two dedicated towards alternatives. So I think that trend is likely to continue.

Please share your thoughts on market volatility in 2025.

Market volatility is likely to increase under a new administration. Trump's political approach is to say things and then the market often is going to react to them.And then we get to see what happens going forward. And so we've already seen the market be volatile related to tariffs. They were on and then they were on hold.

Volatility is going to happen, and it’s going to be more common in the ETF marketplace. That's just to be expected. And that's why, coming back to some of the themes that we talked about, a buffered or risk-reducing alternative to get equity or fixed income exposure is going to be more popular with advisors and investors that want to control that risk and want to make sure that they're focusing on what they want to deliver, what their clients are expecting.

What are your overall expectations for the market this year?

We had a record year for ETF flows in 2024. We passed a trillion dollars in new money. We are on pace to do that again based on how strong the demand for ETFs was in January. But If we see the volatility that I talked about, and if the equity and fixed income market doesn't do as well in 2025 as it did in 2024, we could still have a great year.

We might not set that same record, and that's OK. … So there will be demand for ETFs in 2025. It doesn't need to replicate 2024 for it to be a success story. It might be less than a trillion and it would still be a great year for advisors and for the ETF industry.