Jillian DelSignore on Record ETF Inflows Shaping NDX Demand

things back over to Molly in Chicag our guest. Thanks so much Sam. Joining me now here in studio is Jillian Delsignore, the head of Investor distribution and insights over at Nasdaq Indexes. Jillian, go have you back with us. We've finished our thirduarter. We have broken a full year record in terms of flow through U.S. listed ETFs.'n just through the first three quarters. We talk a lot about this extraordinary demand and this move that we're seeing into ETFs. And more and more regularly, Sam and I are having these conversations. What is driving thisnued flood into the ETF wrapper in space? I think we continue to see a couple of things. One is new investors, right? So we're continuing to welcome hard to believe this late into the game. You know of the ETF game. More investors continue to come in and many of them are retail. We're s more and more. I was just at a conference called Ferecommend it. You're onroof the beach for three days in Huntington Beach, California. Outside it's lovely. And every ETF issuer that I talk to, in all seriousness, was asking about retai Every issuer is trying to figure it out. How do I reach retail?here do I reach retail? What do I reach them with? They're recng this really surge of demand for ETFs education content from the retail investor and the sophistication of the investor to embrace strategies like div income that we've seen huge demand for. We're actually writing a paper on that nowI can come in and share at a later date. But this demand for s of these more sophisticated strategies from retail. And so ETF Fisher was trying to figureI think that's a huge part of what we're seeing and ango prod. Right. Just when I think we can't push the wrapper any further, w it. And so we're continuing to see new product development reaching out to meet investor de And that is leading us to these all time highs. I mean, I'm ready to I don't know what to expect in the fourth quarter because fourth quarter tends to be the biggest of all. And so here we are already at a record. And we're about to enter our biggest quarter traditionally. So very curious to see how the year wraps up. And se look at just the month of September, and we're getting this data right as we just got our Schwab Trader Activity Index data, and it was the first time you may not had a chance to read it yet. We had an ETF as the top net buy in. Five of the top ten net buys for the month were ETFs. And so as I look at September flows alone, they brought in $15 billion. So I want to talk about these two things hand in hand here. Whatou seeing in terms of trends of of investors trying torease their equity exposure? Is there something more structural s happening in how we're using ETFs now that we're starting to see them showp in the place of where we used to see these heavy headline driven single stock names? Absolutely. So I think you have sort of this barbell effect, rig So you have advisors in the middle is what I sort of think about. And they've been users of ETFs while evolving over time. Right? Been users of ETFs. Youe institutions on one side and retail on the other. And I think you're seeing ien usage by both of those ends. I think retail is becoming more educated on th b of diversification. And yes, you can buy single stocks, but you can ly get that exposure and more through buying the ETF benefits, cost benefits. Again just pure diversification benefits from a portfolio construction perspective. So I think the education of retail and sophistication of retail is really driving a lot of that. And then you have institutions on the other side. Sonow when I was in my time at BlackRock and covering asset managers, theras so many conversations about cash equities. How are they utilizing ETFs, some that have looked like capital markets vehicles. You have some of the mosteavily traded, which I'm sure are falling at the very tip top of that list. Some of these ETFs that trade such heavy volume, they they act like derivatives, right? They actpital markets vehicles. And so you're seeing some very sophisticated institutional traders utilize ETFs in place of those trades. So I think you're really seeing not that you'ot seeing uplift in the wealth space. You're seeing uplift on both ends of that barbell. As driving a lot of flow. And Julian, when we started having these conversations,ean, I remember one at the end of last year, we were talking about howe actively managed and that that was o rise. And it was a a metric you were watching. I'm looking ove data that you sent. It's now 32% in not even a year's time. So as you look t rapid growth, I mean, we've talked a lot about why people are attracted to the active. But how is it taking off at such speed? Because its adoption is certainly outpacing many other adoption processes that we've seen in the financial space. Absolutely. Yeah. 32%, 576 billion of the flows we've seen so far this year. There's a couple a couples you're continuing to see demand derivative income that's technically considered active. So you're seeing a lot of flows go into that space. And that's that's sort of a sort of buttressing the number quite abs we talk about sort of just talked about the barbells, right? If you look at that centerpiece, the wealth space, a lot of these advisorsre new to ETFs are coming away from active mutual funds, many of whom are looking to ETFs of these active mutual fund managers who now offer ETFs. So you a lot of this migration from mutual funds and ETFs into those active managers. So if you look at the two categories for which active is the most previght now, it's derivative income and it's large cap equity of all things. So it's not just sort of bond funds that you used to see traditionally as the most active space. A lot of these large cap equity strategies are pulling in a lot of flows And I do think that's driven a lot by wealth demand coming from where ther been consuming the mutual funds from these managers and now consuming the ETFs, something else to keep our eye on, and we've seen a lot of headlines lately is conversions. So a lot of ETF issuers, a lot of traditional active managers are using conversions as ways to enter the space. And some of those numbers are significant. So it'll be an initial pushhat could buttress the numbers of active ETFs pretty immediately. And as we look specifically at the Nasdaq, I mean, I talked to you and Kevin Davitt about this very regul and it continues to attract new products. I mean, the IC comes . What is the demand different ways to access the same index? Tell you about what investors want right now with this more uncertain backdrop we have, I think investors are looking for innn, right? They're looking for companies that are driving the 21st century e, and that's companies that are driving innovation. And what you find in that ise Nasdaq 100. And so we had a very exciting last couple of months in the US, right outside the US, we've had multiple Nasdaq 100 products in those markets for a time inside the US, we hadn't had that. This is atr ecosystem across this index across derivatives which Kevin is talking about. Derivatives, separate accounts sits ETFs. so to see two of the largest ETF issuers in the world c into this space with Nasdaq 100 ETFs. And to see the success that they've had really just emphasizes to us that we are just feeding demand, right? We're not diluting the index. In fact, we're just feeding the demand that's out there and adding to it because we've between those two ETFs, just since July, they've raised over $1 billion. And so and that's not even slowing down what we've seen in the existing ETFs. So we're really seeing demand out there for this innovation index and really seeing it filled through these new products we've been able to bring to market. I'm glad you brought up diluting demand, though, because this dilution conversation comes up a lot when we start to sot of similar products tracking the same indices. And there's that many offering similar things, that they're going to dilute the demand. You say you viewthae competition is actually validating the Nasdaq 100. So tahrough that. Absolutely. I think it's absolutely validating the Nasdaq 100 at the core lios. You know, we've been having so many conversations. And if you look at the way iing about in the market, it is as a core of a portfolio. I think e re misunderstanding of what the Nasdaq 100 is. It's not a tech indeht? This is an index of innovative companies across technology, across healthcare, across consumer discret. And that's what investors are looking for. And so to have this at the c portfolios and to bring optionality and continuing to position that at the core of portfolios across investor types. Whene anyone says that the Nasdaq 100 is tech, I just say Walmart. Yeah, thank you as my example. But Jillian, always such a pleasure to talk to you. Thank y much. Appreciate you joining us with