Tariff turmoil and the great pause

Well, it’s been quite the week. Mid-week, I managed to have a quick catch up with BNY Mellon’s Ben Slavin who gave us a snapshot of how US ETFs were withstanding the volatile markets which on Monday witnessed the S&P 500 fall more than 20 per cent and over the week trillions lost in stock market value globally in what one source described as the tariff bomb.

News of a sell-off in US treasuries and signs of what the President described as ‘queasiness’ seem to have caused a ‘pause’ in the tariff plans, with just China left facing a 125 per cent tariff and the rest of the world 10 per cent, for 90 days.

Everyone has been too busy to notice that, despite the huge amount of trading, ETFs are performing perfectly, trading as usual. "ETFs have continued to pass the test, providing liquidity and price discovery and most importantly they have functioned as intended," Slavin says.

Meanwhile, State Street reported that ETFs accounted for 42.4 per cent of total US equity volumes on 7th April, compared to an average of 27 per cent, and SPY traded approximately USD126.6 billion on that day - an all-time record for any ETF globally.

What will be interesting to see is how the newly popular range of active ETFs have performed in these markets. One of the founding definitions of alternative assets such as hedge funds was that they were measured by absolute return, not benchmarked return. Will the new active funds have managed that in these testing times? Options overlay/defined outcome ETFs should also have survived well but as Slavin points out in our interview, they come in many different guises. The data will emerge over coming weeks as the story continues to evolve.

Our interview this week was with UK wealth adviser Saint James’s Place’s Dr Sarah Ruggins who revealed that the firm is flirting with launching an ETF offering. The firm has over one million clients and close to 5,000 partners, or financial advisers, on its platform, so this could be huge for the European industry.

Voting is open for our ETF service providers and ETF issuers in Canada – vote now for your favourite firms by following this link.

The event this year will be held on 29th May and hosted by the Toronto Stock Exchange.

We have an In My Opinion column this week, in fact an In Our Opinion, written by Denis Harty and Klaus Frank of Waystone, celebrating the rise of Luxembourg in offering CLO ETFs. Traditionally dominated by Ireland, the actively managed ETF sector now sees Luxembourg positioning itself as a competitive alternative, the pair write.

Beverly Chandler, Managing Editor

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