It seems certain sector ETFs are gaining popularity as a way to mitigate bank turmoil.
According to VettaFi’s Todd Rosenbluth, the trend applies to ETFs that hold only a handful of large companies in a given industry.
“[They’re] will be complementary to the broader S&P 500 strategy,” the firm’s head of research told CNBC “ETF Edge” on Friday. existing core strategy.”
Rosenbluth contends the narrow focus of large-cap sector ETFs can improve potential gains.
“[In] in the same way you can do individual shares of the name you like … now you get the benefit of five or six of these companies to add,” he said.
When asked if this ETF sector is trying to reintroduce FAANG stocks – which represent five popular technology companies. Meta, formerly Facebook, (META); Amazon (AMZN); Apple (AAPL); Netflix (NFLX); and Alphabet (GOOG) – Rosenbluth explained that it is difficult to build an ETF with only large-cap stocks because companies can be classified in different sectors.
“You can’t get it now easily with ETFs [holding] just five or six stocks,” he said. “If you really want to call just five or six companies, there’s an ETF coming up.”
However, last week on “ETF Edge,” Astoria Advisors’ John Davi suggested the bank’s upheaval could expose the problems inherent in ETFs linked to certain sectors.
“You have to be mindful of your risk,” said Davi, who runs the AXS Astoria Inflation Sensitive ETF.
For others, the bank turmoil created an opportunity.
‘Not just an independent opportunity’
Roundhill Investments, an ETF issuer, plans to launch three large-cap sector ETFs: Big Tech (BIGT), Big Airlines (BIGA) and Big Defense (BIGD).
This “BIG ETF” will join the Big Bank ETF (BIGB), which was launched last Tuesday. The average market capitalization is $145.5 billion, per the company’s website.
Dave Mazza, the company’s chief strategy officer, sees similar opportunities for growth beyond the financial sector.
“People are bidding on some of the bigger names, especially in the banking space, because they might be the beneficiaries of the bigger regulations that come in there,” he said. “The intention is here [the BIGB] not just a stand-alone opportunity, but an idea [of] be the leader and the potential sweep is down.”
The Roundhill Big Bank ETF is down as much as 5% since its launch on Friday.