scarlet: i am scarlet fu. this is bloomberg "etf iq," where we focus on the access, risks and rewards offered by exchange traded funds. ♪ scarlet: all hail saudi aramco. oil companies, the latest example of corporate seeing more demand for their debt. beta funds are catching some of the assets. we take a look at how china fits into the global trend. and are reports greatly exaggerated? an etf that goes long in short physical stores makes sense, but what happens when the line blurs?

whether you embrace or reject etf's, flows serve as an early indicator for bigger shift in market sentiment. eric balchunas with a read of what the latest flows tell us. eric: what the flows tell us is what they have been telling us for the past six weeks. i have been talking about how people are buying the rally. we will look at spy, ivv, more of the same. a ton of money flowing into that fed induced u.s. equities. just like 2017. one etf that catches my eye is lqd. it is corporate bonds. that is pretty big, but look at the year to date number. 2.5 billion, that is as big as anyone on there. this is the corporate bond area of the etf world. first number that sticks out is 22 billion. that is about one third of all

the flows this year. that is massive. lqd is only the fourth on here. a lot of these funds have higher yield. the thirst for yield traded his back on. let's compare this to the past couple of years to show you how this differs from treasuries. normally, corporate taken more than treasuries because people want that yield. last year, rates went up a little bit and people abandon corporate and went to treasuries. this is like the off year. boom, we are back to normal where corporate's are taking more of the treasuries. exhibit number eight of us being back in a 2017 type environment. scarlet: you are out front and deserve that victory lap. dan egan of betterment joins us, and bloomberg's sarah ponczek. eric showed us how corporate are taking in more flows than treasuries. when you think about saudi aramco selling $12 billion of bonds and now able to borrow at a cheaper rate than the actual

government. what do you see when it comes to the asset risk? dan: do you guys remember christmas of 2018? not a good time. scarlet: it is ingrained in our minds. dan: when people feel like there is some end to something and the beginning of a new thing, they can start over again. i do want to say this is rational exuberance, but 2018 ended on a very scary note. there is a little bit of relief that did not continue to much into 2019. people are comfortable coming back out. scarlet: we get your opinion on this because you are an expert in investor behavior. we are back to the days of what seems like 2018. there was rarely a rush to short duration but that seems to have reversed itself. sarah: we are seeing almost a complete unwinding. we are seeing money going into longer duration funds and out of shorter duration funds.

just yesterday, we saw gotv, the ishares treasury bond etf investing treasury across the spectrum. its largest daily inflow ever. more than $600 million. we've seen a lot of interest in tlt. meanwhile, we are seeing money continue to really rush out of the likes of stip. that is zero to five year bond etf's. when you look at where the flows are going, it seems like the investors truly believe that rates are going to stay lower for longer, that the fed is on hold and maybe we will get a rate cut. eric: you are a behavioral psychologist. we look at the bond etf's that betterman holds. they are kind of all over the map. short-term, long-term, medium-term. do those shift at all? the fed but everybody on this wild, sort of shift.

do you change this at all? how does this shift with the fed in mind? dan: i have a saying if you want to make god laugh, try to get -- time the bond market. we don't change anything, however it does impact the advice we give to client. the risk curve is something you can infer. it tells you what the market thinks interest rates will do over time. we think risky rates will be higher, then there is less chance. we can actually change how much they need to take and what allocations they should hold. it changes the mapping between client risk and them achieving their goals. scarlet: speaking of offering advice, schwab is taking q from netflix and offering a subscription. scarlet: this is catching a lot of attention. sarah: netflix is a great comparison because they have a subscription service.

now, schwab is pretty much doing the same thing. they are charging $30 a month. the service is already free, as you can see on the screen. but what they are offering for $30 a month is this full-service advisory business. what you get, you get certified financial planners. you get rebalancing of portfolios, monitoring 24/7. this is just another step in what we see happening. if you have fund companies, products are going to keep lowering their fees, where else will you scale to? eric: you guys were ahead of this. schwab is not getting into it. what is your reaction? dan: i think the first element is this is good. one of the things we learned is you have to try to figure out how to meet the client how they want to be met. some clients a couple of years ago, we started rolling out advice packages. some clients could say i want to meet for a few hours to get started.

that is the most popular advice package. some people just need a one-off, get everything set up correctly and let it go to low fee investment style. i think it is good they are trying it. i pay a heck of a lot less for netflix, roughly 50%, and most people watch it every night. i'm not sure the price point is really great. if you think about the pricing in terms of basis points, average clients about $100,000 in assets under management. they are taking money of the cash holdings. this is looking like an incremental 30-bit bump for their annual client. eric: we talked about etf's before. you don't need to trade them. the tax efficiency goes away. you say you like them. what is your case for putting them in? dan: especially without etf's are sold inside 401(k)s are pretty tricky. let me walk you through it. say you want to offer a 401(k)

is a benefit to your employee. you say we want to offer 401(k), how much will this cost? i say it will not cost you anything. how is that possible? what happens is based upon the size of your plan and what happens inside of it and how well you negotiate, i will him embed the cost inside of the fund fees. it might be just different share classes. with etf's, it is different. if we go to a brokerage firm and say you want to buy a share, that is the same share you will get everywhere. mutual funds have different share classes that charge different amounts. scarlet: transparency comes to the forefront once again. dan egan of betterment, thank you so much. and sarah ponczek as well. coming up, ryan sullivan, the senior vice president of brown brothers harriman. a recent study from his firm shows investors are ignoring past performance. one etf that caught our attention, despite gold shares

etf. more than $900 million from it. the biggest outflow since november 2016. that comes at the same time hedge funds paired their bets on metals to the lowest. you can find that chart and everything you see on the bloomberg on tv . this is "etf iq." ♪

scarlet: i'm scarlet fu. let's get to the etf lifecycle where we bring you through the three main stages of etf. it always begins with a filing. etf solutions filed a registration for the antique gradual bond fund. it will invest in grade credit. the best ticker of the week honors go to ufo. in its quarry, it will invest in companies that get at least half

of the revenue from the space industry. this includes telecoms, rocket and satellite manufacturing, satellite systems, and imagery services. for some, the final stages is liquidiation. plnd launched in 2009. at its peak, but it has been downhill when it comes to assets. for anyone seeking concentrated exposure on u.s. section just, there is still epol. time now to get passive aggressive where we track the shots fired in the battle between active and passive investing. we know lower cost are driving the ship from active managers to passive products, but where does performance come in? let's bring in ryan sullivan from brown brothers harriman. so, performance matters more than cost in a bull market, i take it, more than any other time? ryan: this year was very interesting in what the survey findings came out.

this year, we saw performance, and tied for number one in the europe and u.s. market. really suggesting firms are trying to pop the hood and better understand the mechanics of the etf. scarlet: smart beta etf's are taking products from active mutual funds. according to your survey, investors use that to whether potential storm, but a lot of them have data in them. does that not end up in a case where advisors end up disappointed because returns are different? ryan: there is more than one case for the smart beta tool. they have really shown them to be a swiss army knife and have multiple uses. we have seen flows supporting the ethos that the idea of a core portfolio is being redefined. maybe bringing in some smart beta for downside risk. potentially some underperformance.

these are really important factors were using when meeting with asset management clients. scarlet: what about active nontransparent funds? funds likely to get sec approval by the end of the year for a new type of etf that does not have to reveal its holdings. what will be the demand for something like this? ryan: i think demand will be relatively high in the early going. we are expecting to see new licensees coming to market. over the past three or four years, we have been fielding a number of questions from a traditional active management clients. there is a lot of interest in better understanding how this may insulate them from front running, how to protect their secret sauce. i think the nice thing about this particular product, it will fit very well into the ecosystem. we are supporting these from the middle and back office standpoint. these look and feel like a regular etf to us. scarlet: if you want active, there are hundreds to do reveal the holdings. interest is not exactly through

the roof. actives only 1% of the pie. ryan: it is growing a little bit, but it is still going to glorify the rest of the market cap. we are seeing a studying incline. increasingly, we are hearing from active management clients that have not launched etf yet better understanding the tools to equip them to take their strategies that they have and put them into an exchange traded wrapper. we have mutual funds, cit's, now this might be another path forward to further increase new launches. scarlet: if you want something in between active and passive, you can get smart beta which has sucked up a lot of the oxygen i believe these nontransparent actives may be searching for. ryan: at this point, we might see investors hold their wallets a little bit. in terms of interest from our client base, there is a lot of buzz and we expect to see those

licensees and registers increasing. scarlet: it looks like the greater china region was strong in terms of etf usage. talk is specifically why that is. ryan: greater china, a lot of nuances in the market. we have a supplement coming out that better identifies what those nuances will be between hong kong, mainland china and taiwan. it is really showing what could be future growth for global etf managers. what we're expecting his continued growth in the u.s., but the steepness of that growth curve will probably start to slow down. asia really presents that potential of outsized growth over the next 10 years for etf managers. when we pivot from what asian product demand looks like, they are looking for core index exposure and smart beta which suggests the maturity level is beginning to ramp up. scarlet: what is the demand for active etf's?

ryan: it is a little bit mixed right now. some strategies coming through with a hong kong regulators that we expect will really allow actively managed etf's to permeate the market. right now, they are not approved that it is in process. it is a little downwind from the u.s. and european markets. scarlet: ryan sullivan, thank you so much for giving us the synopsis of your latest survey. coming up, we quick on an etf that goes long on online retail and short on stores. we want to highlight a brand-new function on bloomberg. the launch of btfie, a fresh look at etf's in europe. from new york, this is bloomberg. ♪

scarlet: i'm scarlet fu. this is bloomberg "etf iq." every etf that offers exposure to a sector, it is not long before others promise the same. in retail, it can seem like clix are beating brick and mortar. the long online short stores etf is designed with that in mind. simeon hyman of proshares is here with us, but eric balchunas will give us a drill down into that fund. eric: this is clix, the short stores etf. or as i like to call it, the death of the mall trade.

a lot of people were going long amazon and shorting qrt's, despite an etf that has a lot of brick-and-mortar exposure. this sort of packages it for you in a sense. it is $50 million, so it is pretty up there. over a year old, 65 basis points. let's look at the holdings. it goes long online retailers which are really clearly seen here. all the names you know. a 50% short position in more of the physical stores. these are companies like foot locker, kohl's. that is the trade essentially. some of these firms are going to little more physical. opening stores. amazon bought wholefoods. some of the brick and mortars are looking to get revenue online. there is some blurring of the lines, but largely trying to capture.

let's look at the performance since this came out. it is beating the s&p by a good amount, although it is time with the consumer discretionary etf which it probably has the most in common with. 28% return is pretty good. wayfair, amazon driving those returns. this will come down to the trade might get a little blurry, but it is up in a pretty fine way. scarlet: still with me is simeon hyman. it is not black and white, amazon has its own stores. wayfair will open one of in massachusetts. how do you deal with these blurred lines? simeon: we are super proud of the performance because we are only 50% net exposed so we keep up with one of the highest line -- flying sectors which is a point of pride for the performance and etf. specific to your question, the lines are blurring, but a couple of things to keep in mind. first, when you think about the

evolution of the space, the legacy brick-and-mortar players who are serving to increase their online presence, it is often at the expense of their margins. they may not be that great at it. they have all of that infrastructure. as the online player starts to open some stores, they may be some of the folks that gets these retail right. scarlet: is this not more tied to the outlook of consumer spending than anything else? simeon: it is but the short component comes in handy. over time, the long leg has over performed the short leg. in q4, boy, it was really nice to be 50% net exposed. the trend does supersede some of the overall economics in the retail industry. you compare this to the s&p retail index, which you know that very well, the outperformance is stunning. eric: let's talk about paws, the pet care etf.

it does not have a lot of assets. the fundamental story was really compelling to me when you get through the names of what is going on here. how hard is it to sell this, because some investors will say things about the etf. i cannot put my client and something called that. does this have any problem in terms of getting the advisor over the hump into something called the pet care etf? simeon: it has no lack of immediate recognition. i spent a time of money. i happen to be the resident skeptic because i am a guy that does not have a pet. i'm the skeptic. but, once you look at the numbers, you walk through the numbers, we know the top line is growing. it grew through the great recession. people treat their pets like children. more people have pets than kids. but i do look at the fundamentals. one of the interesting things, as an example, if you roll up the constituents, they have

double the return of access. think about pet pharmaceuticals. it is cheaper to get a drug to market, the generics are not there, and there is not a lot of other competition. have you ever heard of medicare for dogs as a risk? not really. once you get past, hey, great idea, the fundamentals are there as well. scarlet: simeon hyman, thank you so much for bringing us your thoughts. the etf industry has something for everybody, including the middle child, mid caps. in there's an etf for that, we highlight a fund where size matters, but in an unexpected way. ♪ scarlet: the ishares edge msci side factor etf, better known by side, turns the market cap equation upside down. it tracks in index of large and mid-caps that allocates its holdings so the smallest of the companies getting heavier index weight than the largest firms.

size is rebalanced semiannually. it contains 650 names that are almost all based in the u.s. they represent all the major groups in the s&p 500 with a heavier tilt towards tech, industrials, financials, and consumer discretionary. within these groups, dominion energy, wayfair, chipotle, and first data get heavier weights. some $450 million in assets. an expense ratio of 15 basis points. since launching in 2013, the fund has trailed the s&p 500 by about 10 percentage points. year-to-date, side is holding its own. size gets the green light in the bloomberg intelligence traffic light system. with a note with its alternative weighting. this is a bet on smaller large caps or really mid-caps. eric: mid-caps are the jan brady of the stock market, they are forgotten. you go back to 1994, they

outperformed large caps. scarlet: eric with the gen-x reference. that does it for bloomberg "etf iq." be sure to catch us next wednesday. this is bloomberg. ♪ want more from your entertainment experience?

just say teach me more. into your xfinity voice remote to discover all sorts of tips and tricks in x1. can i find my wifi password? just ask. [ ding ] show me my wifi password. hey now! [ ding ] you can even troubleshoot, learn new voice commands and much more. clean my daughter's room. [ ding ] oh, it won't do that. welp, someone should. just say "teach me more" into your voice remote and see how you can have an even better x1 experience. simple. easy. awesome. alix: the last oil frontier.

conoco bets bid on alaska. i sit down with the ceo and drill down into their expansion plans. saudi's bond bonanza. saudi aramco sells $12 billion in debt. what it says about oil demand in 2049. pinocchio's at the washington post? the usda rips into the newspaper after it said the administration had plans to give more power to the pork industry over safety inspections. i'm alix steel. welcome to bloomberg "commodities edge," 30 minutes focused on the companies,