Kevin Kelly, CEO of Kelly ETFs discusses creating disruptive indices and ETFs

Presented by Syntax Advisors

Margareta Hricova: Welcome to ETF TV – your insight into the world of exchange traded funds, issuers and investments. I am Margareta Hricova and joining me today is Kevin Kelly, CEO of Kelly ETFs and Deborah Fuhr.

Welcome to the show.

Kevin Kelly: Thank you for having me.

Deborah Fuhr: Thank you.

Margareta Hricova: Kevin, you’ve been involved in the ETF industry for some time. You’re a CEO of three companies. Can you tell us about the products these companies offer?

Kevin Kelly: We’re a sponsor and index provider for complex SRVR and INDS ETFs with an issuer, it has almost around $2 billion in it. And as we’ve evolved, we’ve decided to have our own trust, where we can issue our own products out to the marketplace under Kelly ETFs. So we have our own index provider, we have our own issuer and we have our own RIA.

Deborah Fuhr: Why did you decide to launch the new companies and your own indices and ETFs?

Kevin Kelly: So one of the reasons why we decided to do this is to have the flexibility, especially when it comes to timing and control and actually working with institutional investors and our partners. So it really allows us the latitude to come out with products when we need to come out with products, especially given the regulatory environment today.

Margareta Hricova: And you recently listed three new ETFs. What drove you to pick the three themes for your first ETFs?

Kevin Kelly: Well, we’re really excited about is that these are concentrated portfolios that are giving direct exposure to what investors want. So if you look at the CRISPR & Gene Editing ETF, XDNA is the ticker, it gives you that access strictly to CRISPR and gene editing within the genomics and biotechnology space.

If you look at the Hotel & Lodging Sector ETF (ticker: HOTL), you’re actually getting exposure to travel and tourism, but actually to a sector that’s not influenced – like airlines where they have regulatory environments or cruises – you actually get to go at the heart of it if you want that targeted exposure.

And the last one is the Residential Apartment & Real Estate ETF – ticker: RESI – and that actually gives you exposure to an unbelievable demand that’s happening in the housing market, where you’re seeing people renting a lot longer. And there’s about 43 million households here in the US that rent. So we wanted to give that targeted exposure. That’s why we came out with HOTL, XDNA and RESI.

Deborah Fuhr: Your website mentions that investors can invest in these strategies through SMAs or ETFs. When do investors prefer SMAs and when do they prefer ETFs and why?

Kevin Kelly: There is an interesting thing happening in the marketplace right now, where investors are looking at direct indexing or they’re looking at customized portfolios. So offering that flexibility for investors is pretty critical today, because certain institutional investors that we work with and talk with, owns some of the companies that are already in the ETFs. So this gives them flexibility where they can add on to the other constituents.

So it’s really about flexibility for the investor and what’s important is the investment intelligence and the strategy in the construction. And that’s what they’re really looking for and that’s what we’re able to afford, not only through an ETF but also providing indexes.

Deborah Fuhr: What is your thought on the future of direct indexing, because many think it’s going to become larger than the ETF industry?

Kevin Kelly: I don’t believe it will become larger than the ETF industry, because the ETFs alone give liquidity, especially daily liquidity, momentary liquidity, so direct indexing will be a compliment to that. Retail investors, as well as advisors are going to be a big segment and they will continue to be a big segment of the ETF industry, and it won’t be displaced by direct indexing.

Margareta Hricova: Do you create indices for other ETF issuers to use as the benchmarks for ETFs?

Kevin Kelly: We do work hand in hand with a lot of issuers, especially overseas, as we have a great presence here in the United States. But we can now help complement institutional investors or overseas issuers to help them distribute product over in their demographics and in their regions.

Margareta Hricova: And do you plan to launch more ETFs this year?

Kevin Kelly: We’re really looking forward to coming out with several different other strategies to help investors get the tools that they need, and give them that precise strategy construction and exposure that they’re looking for. So we do have a plan to launch several more ETFs throughout the year.

Margareta Hricova: Exciting plans. And what is your outlook for the ETF industry in 2022?

Kevin Kelly: I think the ETF industry is actually going to boom this year, even after the rapid growth we’ve had over the past several years. They’ve never been more important, especially in investor portfolios, given what’s going on with increased volatility. As well as, you know, we’re starting to come off of monetary policy around the globe. So I think investors are really going to be relying heavily on ETFs as tools to rebalance, reconstitute, and retrade a lot of their portfolios. I mean, we’re talking about money in motion – ETFs are great for money in motion.

Margareta Hricova: Thanks so much for joining us, Kevin.

Kevin Kelly: Thanks for having me. Really appreciate talking about HOTL, XDNA and RESI!

Margareta Hricova: Debbie, can you talk about some of the other news in the ETF industry?

Deborah Fuhr: Sure. So last week, there were 37 new listings from 26 issuers on 13 exchanges and there were 39 cross-listings. There’s now 219 new listings that have been made during the first few weeks of 2022. There’s been 188 cross-listings, 23 closures year to date and 18 delistings. So net. We’re up 196 products and 170 new cross-listings.

Last week, some of the new products that came to market would be BondBloxx listed seven high yield fixed income sector ETFs, so many people have been watching to see when they would come to market. Fidelity also listed in Europe, a physical Bitcoin ETF, something that’s not possible in the US.

There were 13 fixed income ETFs listed last week, which is pretty large compared to the trends over the past number of months, when it’s been mostly focused on equity products.

Asia-Pacific had 15 new listings. The US had 14, one in Latin America, two in Canada, and five in Europe.

And looking at some of the trends through the end of January in terms of net flows, the active ETFs gather net inflows of 8.79 billion during January. The market decline caused assets overall in most categories to decline slightly, including active ETFs, so there’s 429 billion dollars invested.

And when we look at the array of products, they come from 287 providers. They’re listed on 29 exchanges in 22 countries. And we’ve seen 22 months of consecutive net inflows into active ETFs. So it’s clearly an area where many issuers are looking at converting products or launching new products. So more to come next month. Thank you.

Margareta Hricova: Thanks so much, Debbie.

Thanks again to Kevin for joining us today and to our sponsors Syntax Advisors, and of course, to all of you for watching. To watch prior episodes and to see news from the ETF industry, visit us at ETFTV.NET.

Thank you.

ETF TV News does not provide investment advice, nor recommend products.

Published on February 23, 2022