ETF Edge - Getting paid to follow Bill Ackman? 9/8/25

Episode Date: September 8, 2025

High-income ETFs are all the rage right now. To help itself stand out, one company is playing off some of the biggest names in investing. But will the sequel do as well as the original? Plus, find out the what’s resonating with the youngest of individual investors.   Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

The ETF Edge podcast is sponsored by Invesco QQQ, proud provider of access to innovation for the last 25 years. Investco Distributors, Inc. Welcome to ETF Edge, the podcast. If you're looking to learn the latest insights on all things, exchange-traded funds, you're in the right place. Every week, we're bringing you compelling interviews, thoughtful market analysis, and breaking down what it all means for you, the investor. I am your host, Dominic Chu. Now, income generation is the latest craze, but it's getting harder to stand out. Will it also get harder to deliver on those expectations?

Here is my conversation with Adam Patty, the CEO of Vista shares, alongside Shelley Antonyowitz, the chief economist at the Investment Company Institute, or ICI. Adam, I'll start with you, given that you are the fund operator in this discussion right now. your company has been tracking some of the kind of bigger investing type names, one in particular over the course of the last several months. And now you're about ready to launch another fund tracking another notable hedge fund manager. Take us through what you're launching this coming week. Well, thanks for having me. Yeah, tomorrow we are launching ACY. And the strategy is to invest like Bill Ackman, but with 15% target income annually paid monthly.

So we look to pay out 1.25% per month using an option strategy over all the holdings in the portfolio. And the strategy mirrors exactly what we did with OMAH back in March, which is invest like Buffett, but with the 15% annual income. So that fund has been very successful, driving almost 500 million in six months. We're getting great feedback. Performance has been strong. So, you know, looking to replicate that success and bring out unique strategies that help investors. diversify their core equity portfolios. Now, Adam, it is not to take anything away from Bill Ackman,

but Bill Ackman maybe hasn't been around or a household name as much as Warren Buffett and Berkshire Hathaway have over the last several decades. So as you launched OMAAH, which tracks the Berkshire portfolio with your income enhancements, what exactly led you to Bill Ackman to follow up as a second act to your Berkshire tracking fund? Yeah, I mean, look, there's only one Warren Buffett.

So you've got your one and done if you're trying to find another Warren Buffett. However, you know, look, there are a slew of investors out there that have tremendous track records. We're absolutely brilliant who have a lot of respect. And certainly Bill Ackman is right at the top of that list. So what we did is we went back into the lab and we looked at a whole host of different types of managers. And we tried to identify those managers that tend to have high conviction, and hold their securities in their portfolio for a long period of time. So that really closed down the loop, right?

So a lot of managers are out there doing a lot of trading on daily basis, or they're hedging out certain exposures on their long positions. We were looking for high conviction managers. And certainly Bill Ackman is the best of the best when it comes to that. And we settled on working on his portfolio, doing the research, and then determining if we can in fact pull off a covered call strategy on his holding, which after looking at many years of his portfolio, we determined, yes, we can, and we're bringing ACKY out tomorrow.

All right. So, Shelley, now I'll turn to you. As you look at things from kind of like that high perch from the investment company Institute, which is the trade organization, of course, that represents many mutual fund and ETF managers out there. We've talked a lot about the evolution from passive, you know, ETF type products, indexing type products into this more active stock picking type space, just how quickly is that product growing, the kind of tracking star managers type product, and maybe perhaps just active ETFs at large?

Active ETFs have really taken off. I mean, they're going to be a big topic here at our inaugural ETF conference, as you can see the sign behind me. So I'm beaming in from Nashville. And active ETS right now are $1.1 trillion. And there is hundreds of billions of dollars a year that have been coming into organic growth into active ETS. Active ETS cover a range, just a whole range of strategies. Many of them are focused on cutting edge technology. So you have ETS that are looking at AI.

They're also looking at, they're also looking at cybersecurity. But, you know, if we want to go back over to high-income ETS, high-income ETS are super popular as well. And we've got an aging demographic here in the U.S. The baby boomers are solidly in retirement, and they're looking for these types of, income streams that Adam was talking about. And so high income ETFs are great because they can help, because of this steady income stream, they can reduce the overall volatility in the

portfolio. They typically use dividend paying stocks, high yield bonds, and as Adam mentioned, these option strategies to also add income to the portfolio. If you just look at the dividend paying high income dividend paying ETS. There's over $350 billion in assets, and those got $20 billion in inflows in early September. So there is strong demand for the product. Shelly, what exactly, I mean, you mentioned some of the demographic tailwinds driving some of these income producing type strategies. I wonder if you could also take us through a little bit about just how you see some of these types of income overlay on equity portfolio strategies, what type of role they play in an investor portfolio as they approach a time where income becomes more of a priority.

Where do they fit vis-a-vis, say, a high-yield bond fund or an investment-grade bond fund or a treasury-type fund? I think that the high-income strategies where they're looking at or they have stocks in the portfolio, dividend paying stocks and the overlay of the option strategy, that actually helps provide a bit of a diversification. It also allows, with the exposure to the equities, it also allows some of these funds to have some upside risk. Now, if you're using a covered call strategy, some of that will be mitigated, that upside would be mitigated. But you have to remember that the portfolio is receiving premiums from writing those covered calls. And that is helpful for investors

looking for income. Adam, the covered call aspect of a portfolio. In essence, it means that you're selling options, call options at out of the money levels above the current market for the portfolio overall, generally speaking, and then using those option premiums to enhance the returns and then pay them out. My question to you is, we have been living in a very low relative volatility regime for months, quarters, if not years at this point. Maybe an exception can be made for the Trump tariff announcements that came out in April, kind of through the early part of May. There was volatility there, but in a world where volatility is not as existent as it has been over the last several years, what exactly does that do to the type of

of options writing that you have to do to generate the returns that you are targeting? It's a great question and that's why you need to do the research. So, you know, as volatility goes down it certainly gets more difficult to generate those premiums. But the key for us is, well, first of all, it's the research looking back in history at different volatility regimes to ensure that in fact we can make our numbers. But I think what's important to understand is that we're not waking up in the morning and trying to maximize our income, right? We are trying to hit 1.25% per month, which is a modest amount, actually. You know, we're not, if we generate more than 1.25% per month, we're going to roll it back into the NAV. And in fact, if our

underlying holdings generate dividends, that's being rolled back into the NAV as well. So, you know, we are, you know, we don't want to maximize the income. We want to be stable and consistent to hit that 15% on an annual basis. And, you know, our research indicates we can do that in any type of volatility regime. We also have the ability to use different options strategies, not just covered call strategies. So if things really tighten up, we can switch around the strategy, we can even use index options if we need to. But for now, I think we're all set with our covered call strategy that covers the entire portfolios. Okay, Adam, it was Berkshire to start and Warren Buffett. It is now going to starting tomorrow and this week going forward, be Bill Ackman and Pershing Square.

what exactly has been the demand profile that you've been evaluating from the investors that you are, in essence, polling to see the types of products that you were bringing to market and what types of managers? You mentioned the idea of having concentrated picks, you know, kind of best idea stock pickers out there. But as we look down the line, can we expect more funds in your mind to come out that are tracking kind of like these star type managers? Yeah, I mean, when we filed for this product, ACKY, we filed for a slew of other ones as well, based on our research. So if this does well, we can certainly bring out others. This is not everything we do, but we think it's an important piece of it. And, you know, we're just going to make sure that whatever we do bring out, we under promise

and over-deliver and, you know, has a high-quality portfolio and is designed properly for different market conditions. And so, you know, we hope this is the second of a family of similar products that we could bring out in the future. Shelly, this is the latest evolution in this kind of progression in the ETF business over the last couple of two or three decades at this point. From almost being focused exclusively on passive or index type tracking instruments to now seeing a boom in the number of these active managed ETFs. What exactly has been the primary driver in your mind of that kind of dramatic shift that we're, we're seeing from index passive type investing that appeal to the masses, a fire and forget type strategy, if you will, to now having one where investors are maybe even actively seeking

outperformance above and beyond an index return? Well, we're seeing a lot more financial advisors use active ETFs in their model portfolios. Recent data shows that about one third of financial advisors are using an active ETF in their model portfolio. portfolios when they're managing their retail clients assets. Also, you've got the investors, the sort of do-it-yourself in ETF investors, and they are also flocking to active ETS. They latest data shows that there's about $100 billion of direct investment by retail investors in active ETS. So, you know, there is this appeal also.

ETS, they have broad appeal across sort of the age range, about half of ETF retail owners are between the ages of 35 and 64, but a quarter of them are under 35. And a lot of these investors are attracted to more of these innovative ETS and these thematic ETS, as I was saying before, you know, the cutting edge tech, the cybersecurity, crypto. They're looking for those exposures. Okay. Now, Adam, a final question to you, before I get to Shelly with her final question. My final question to you is, as you look out for the balance of this year, given what you've seen in terms of your investor flows, given what you've seen in terms of interest in your funds,

given what you've seen in the portfolio dynamics of your underlying products, what do you best guess could be the outcome that we have going into the fourth quarter of this year and the first quarter of next? Is this a bull market that can keep continuing, or are there real storm clouds on the horizon in your mind? Gosh, I mean, putting aside the geopolitical risks

that we're dealing with daily, The big trigger, I think, is interest rates and where that goes over the next few months. Hopefully, you know, for the sake of the market, I'm hoping for a drop in rates. But I think the biggest challenge that investors are going to have, regardless of where the market goes, is the fact that the S&P 500 and the cues are so over-concentrated in their top 10 holdings and that the exposure they're providing has a tremendous overlap. So I think it's 35% of the S&P 500 and 45% of the Q's. are basically in the same companies.

So all these investors who think they're diversified, what they are going to find, God forbid, there's a large pullback is that these mega cap tech companies are going to hurt their portfolios. So I think what we're seeing now, and what I would encourage investors to do, is to diversify. Regardless of whether the market's going up or down,

you need to diversify and you need to diversify and your core equity as well because the main indexes are not diversified anymore because they've had a historic run-up. in the mega cap tech companies. And that's why products like ours and others that are more value tilted or quality tilted are starting to get more traction because investors are looking to, you know, get into different types of equities that they don't have as much exposure to and get ready for a downturn if, in fact, there is one. All right. So that's that side of the equation. Shelly, in addition to being the chief ETF researcher for the Investment Company Institute,

you're also the chief economist. I'm going to ask you to put that economist head on here. You watch the data, you've seen it come in. We've heard of many other economists and their views on what the economy could look like in the coming months for the U.S. What exactly do you think is going to be the base case scenario for the U.S. economy over the course of the next couple of quarters? Over the next couple of quarters, I mean, certainly the employment report that came out on Friday was very disappointing. and I think that has, you know, cinched the case for a rate cut in September by the FOMC. So we'll definitely see the funds rate, you know, a cut in the funds rate in September. Going forward, depending upon what the labor market looks like, and then, you know, we're also going to, at the end of this week, get some inflation data.

So that's going to be key to the Fed's decision as to whether to accelerate the path that they have for, rate cuts going forward. Right now, the market is pricing in three rate cuts, and that's up from the two they had previously. I think that we'll see a slowdown in GDP. Are we going to go into a recession? Maybe not. You know, the Fed is going to be very proactive on trying to support the labor market, but they do have the dual mandate, and they are going to watch those inflation figures very closely. And so while they'll continue to cut rates after September, they may, the pace of those rate cuts are going to depend on the inflation numbers. Now it's time to round out the conversation with some thoughtful analysis and perspective to help you better understand ETFs with our Markets 102 portion of the podcast. Shelley Antonyowitz of the Investment Company Institute continues with us now.

Shelly, thanks for sticking around. This is an interesting dynamic because you. wear an ETF researcher hat. You wear a chief economist hat for the Investment Company Institute, which you are coming to us right now live, at least it was when we taped this thing, from the ICI's first ever ETF conference out in Nashville, Tennessee. What exactly was the thinking from ICI standpoint as to why launch an ETF specific conference? And what exactly are you hearing from the participants out there right now? So I see I looked at the landscape of ETF conferences that were available to the industry, to financial advisors.

And we saw that there was a gap there, and we felt we could step in and fill that gap. And the gap was providing a policy-oriented ETF conference. So industry participants, the entire ecosystem from the exchanges, fund sponsors, intermediaries all come together and they discuss substantive issues and policy related to ETS. So this is a conference for the industry, for the industry participants and this was this is a huge success for ICI. We definitely had the right call. We have 700 attendees at this conference. Now you shall and Shelly, by the way, you mentioned substantive, right? And I want a key on that word.

These conversations that you're having about the ETF business are of that substantive type nature. What exactly is the bulk of that substance that's being talked about at this conference? There are a plethora of different catalysts and contextual pieces that are affecting the ETF business right now. So what's the big buzz coming out of Nashville at your first ever ETF conference? Well, the big buzz, so our program covers a whole range of topics, but the one that's generating the biggest buzz and most of the chatter and talk is the ETF share class issue. So as you know, the SEC is considering whether or not to allow a mutual fund to have an ETF share class.

There are over 70 applications that have been put in with BSEC, and I. SCI has been working tirelessly with hundreds of industry participants to be prepared through generating working groups, to be prepared for if and when the exemptive relief is allowed for mutual funds to have an ETF share cost. Shelly, what is it going to mean for investors out there? And how exactly does it change the ETF landscape for as much buzz as it is generating, How substantive, in your word, substantive will it be for the ETF business for there to be ETF share classes that are attached to some of the biggest mutual fund complexes in the market right now?

It's going to be really, it's going to be a huge deal for the investor. So investors, you know, most of our fund sponsors are very agnostic between offering a mutual fund between offering an ETF. They're offering strategies. They're offering solutions and investment strategies for investors. They don't care if an investor wants it in a mutual fund product or an ETF product. And so for investors that might prefer an ETF product, allowing them to have that alongside the mutual fund share class is going to be huge.

There is trillions of dollars in mutual funds and allowing an ETF share class in a mutual fund already provides sort of some economies of scale for the ETF, the new ETF share class, and the mutual fund side, those that are in the mutual fund side, also receive benefits from having both products within the same portfolio of assets. All right, so that's a big deal there. And we're going to end this with one question about the kind of macro state of play, if you will, from your researcher and economist hats as you wear them duly, so to speak. What exactly are you looking the most out for in the next few months as we close out 2025? Well, I'm looking out for, I'm looking out for macroeconomic conditions. But, you know, the ETF product has been very resilient. When we saw the double-digit losses in both the equity markets and the bond markets in 2022, ETFs were growing like gangbusters.

So I would expect that to continue. As the Fed starts to lower interest rates, we've got $7 trillion sitting in money market funds. Those investments will become less. attractive as short-term rates come down. That's going to mean that money is going to gradually flow into more what we would call risk on assets, stocks and bonds. And ETS are going to be one of the products of choice for investors to get that exposure to stocks and bonds. All right. Shelly Antenewitz at the Investment Company Institute. Thank you very much and good luck with your conference. We appreciate it. That does it for us here at the ETF Edge podcast.

Thanks for listening. Join us again next week. week or just head over to etfedge.cc.com. How does InvescoQQQ rethink possibility? By rethinking access to innovation and the NASDAQ 100, let's rethink possibility. Investributors, Inc.