Exchange-traded funds (ETFs) may have a significant untapped market waiting for them to capture. Calamos Investments’ Matt Kaufman pointed out that there are trillions of dollars sitting in CD and money market accounts, surpassing the size of the ETF space itself. This presents a lucrative opportunity for ETFs to tap into this vast pool of capital. Kaufman, the head of ETFs at Calamos, believes that there is a substantial amount of money on the sidelines that could potentially flow into ETFs.
Kaufman highlighted the importance of structured and options ETFs in providing stability, particularly in an environment where interest rates are expected to remain elevated for an extended period. He emphasized that these specialized ETFs are designed to offer risk management and income, which were challenging to obtain from traditional bonds when interest rates were at historically low levels. With interest rates gradually rising from near-zero levels to 4 or 5%, structured and options ETFs can now deliver capital protection over a specific time frame. This ability creates numerous opportunities for investors to utilize these products effectively.
In a higher-rate environment, ETFs can offer significant advantages, especially for individuals seeking to outpace inflation, such as retirees. Kaufman pointed out that investors can achieve returns greater than the risk-free rate through ETFs, where their capital is linked to the market with limited downside risk. Moreover, all gains from these investments are tax-deferred, providing additional benefits to investors. This combination of growth potential, market exposure, and risk mitigation makes ETFs an attractive option for investors seeking to navigate a dynamic financial landscape.
Calamos Investments recently introduced a suite of 12 structured protection ETFs, signaling the firm’s commitment to expanding its offerings in this space. By launching these specialized ETFs, Calamos aims to cater to the evolving needs of investors looking for innovative solutions to manage risk and generate income in a challenging market environment. The introduction of these ETFs underscores the growing popularity and relevance of structured products in meeting the diverse investment objectives of market participants.
Through targeted strategies and innovative product development, ETFs are poised to capture a significant share of the trillions of dollars currently held in CD and money market accounts. As investors increasingly seek alternative avenues for wealth preservation and growth, ETFs present a compelling opportunity to capitalize on this untapped market potential. With the right mix of risk management, income generation, and tax-efficient structures, ETFs have the potential to revolutionize the way investors approach asset allocation and portfolio diversification in today’s complex financial landscape.