Masters in Business: At The Money – The Flood of New ETFs

Host: Barry Ritholtz
Guest: Dave Nadig (President & Head of Research, ETF.com)
Date: October 1, 2025

Episode Overview

This episode tackles the explosive growth and transformation of the Exchange Traded Fund (ETF) industry in 2025. With over 600 new ETFs launched in just the first eight months and many more anticipated, Barry Ritholtz sits with ETF expert Dave Nadig to decode what’s driving this boom, what it means for investors, and the transformative trends—ranging from crypto exposure to leveraged single-stock funds—shaping the space.

Key Discussion Points & Insights

1. ETF Launch Boom: Quantity vs. Quality

• Current Situation: 600 new ETFs launched so far in 2025; possibly reaching 800-900 by year’s end.
• Low Cost Still Dominates: Most ETF assets remain in cheap, index-based products, providing “low-cost beta.”
  • Nadig: “It’s just hard to beat that. It’s one of the best deals going in asset management...” [02:54]
• But… New Launches are Increasingly Expensive: Most new ETFs feature “insanely high fees” and speculative structures.
  • Nadig: “Almost all of those products are very expensive. Doesn’t mean some of them aren’t good, but they’re all very expensive.” [03:11]

2. Who Profits? Revenue Flows Into Expensive Products

• Contradiction: Although most assets are in low-cost funds, a quarter of industry revenue now comes from higher-fee products (>1%).

  • Nadig: “About 25% of the implied revenue from flow is going to products that cost over 1%.” [04:17]

• Speculative and Niche Offerings: High-fee ETFs often use leverage, derivatives, or options to enhance or protect returns—useful for specific strategies but inappropriate for buy-and-hold investors.

  • Nadig: “Like a really sharp knife in the drawer... it’s not a one size fits all thing. So I have some concern…” [04:40]

3. Innovations and Trends Transforming ETFs

• Three Hot Buckets:
  1. Crypto ETFs:
     • Not just Bitcoin; Ethereum, Solana, and other coins—plus staking and derivative-based income products.
     • SEC’s permissive stance means more coins likely to become spot ETFs soon.
       • Nadig: “That ecosystem of crypto products is going to get very complex very quickly.” [05:54]
  2. Single Stock Levered/Inverse/Income ETFs:
     • Funds offering 2x, -2x, option overlays, income enhancement on single stocks like Apple.
     • Industry is launching “all the things”—possibly several thousand more ETFs in just this segment.
       • Nadig: “Legitimately... this time next year we could have several thousand more ETFs than we do right now.” [09:29]
  3. ETF Share Class Conversions:
     • As Vanguard’s patent expires, other fund companies poised to convert mutual funds to ETF share classes, bolstering flexibility and tax efficiency.
       • Nadig: “I would suspect by the end of the year we could have maybe a thousand of those individual share class ETFs turned on.” [11:44]

4. BlackRock’s IBIT: A Record-Setting Crypto ETF

• Phenomenal Growth: BlackRock’s IBIT reached ~$82 billion in assets rapidly, smashing records.
  • Nadig: “I think IBIT and Bitcoin as a class has really kind of blown all those things out of the water.” [07:12]
• Institutional Utility: Institutions favor ETFs for easy custody, sidestepping the headaches of handling raw crypto.

5. SEC’s Permissive Environment

• More Exotic Offerings Allowed:
  • Single-stock ETFs, more leverage/inverse products.
  • Regulatory green light means the menu for investors will continue to expand rapidly.
  • Nadig: “We’re going to launch all the things, as I like to say, all the things.” [08:27]

6. Why ETFs Beat Mutual Funds

• Tax Efficiency:
  • ETFs are inherently fairer—investors don’t get hit with capital gains due to other investors’ redemptions.
  • Nadig: “Individual investors in a mutual fund can often get tax distributions through no fault of their own… In an ETF that simply doesn’t happen. It is simply a fairer mechanism.” [12:37]
• Vanguard’s Model Goes Mainstream:
  • ETF share class structures, previously patented by Vanguard, now open to the industry and set to explode in adoption.

Notable Quotes & Memorable Moments

• On ETF Launches & Fees:

  • Dave Nadig: “Most of the new products... will probably have 800, 900 by the end of the year. Almost all of those products are very expensive. Doesn’t mean some of them aren’t good, but they’re all very expensive.” [03:11]

• On the Threat of Speculative ETFs:

  • Nadig: “Like a really sharp knife in the drawer... it’s not a one size fits all thing. So I have some concern that individual investors see the marketing from the industry... and get sort of suckered into them.” [04:40]

• On BlackRock’s IBIT Dominance:

  • Nadig: “IBIT and Bitcoin as a class has really kind of blown all those things out of the water.” [07:12]

• On Massive ETF Proliferation:

  • Nadig: “Legitimately... this time next year we could have several thousand more ETFs than we do right now.” [09:29]

• On Mutual Fund Disadvantages:

  • Nadig: “The ETF also brings other things that are helpful... but the big reason mutual funds would probably get the kibosh today is they're inherently less fair...” [13:25]

Timestamps for Key Segments

| Segment | Timestamp | |-----------------------------------------------|------------| | Introduction and ETF launch overview | 01:51 | | Role of low-cost index ETFs | 02:50 | | Profits & high-fee ETF launches | 03:46 | | Speculative and niche ETF risks | 04:33 | | Biggest trends (crypto, single-stock, share class) | 05:44 | | BlackRock IBIT’s rapid growth | 06:39 | | SEC’s permissive ETF environment | 07:51–08:22| | Single-stock ETF proliferation | 09:40 | | ETF share class relief (Vanguard patent, DFA) | 10:17–12:01| | Mutual fund flaws vs. ETF benefits | 12:21–13:43| | The future: Almost everything in ETFs | 14:23 |

Summary & Closing Insights

• ETFs are Now the Default Investment Vehicle:

  • The ETF wrapper is likely the future of asset management for almost all asset classes. Almost any exposure—passive, active, speculative—will be available in ETF form.
  • Nadig: “It's hard for me to see how we're going to make it any more efficient... the ETF structure is where you're going to probably get almost all of your exposures for the foreseeable future.” [14:25]

• Investor Caution Needed:

  • While the core of ETF money is in cheap, passive strategies, investors must beware the proliferation of expensive, complex products.
  • Ritholtz: “Tread carefully if you're playing in those spaces... those are potential accidents waiting to happen. Use ETFs for what they're really good at...” [15:06]

In essence: The ETF universe is growing faster and more complex than ever. Amid this flood, the best advice remains to focus on low-cost core exposures and approach new, complex products with skepticism and care.