Reggie Browne, director at GTS, joins Yahoo Finance, the talking point ETF investors should watch amid recent natural disasters in the United States.
ALEXIS CHRISTOFOROUS: Now is the time for our ETF report presented by Invesco QQQ. And for that, I welcome Reggie Browne, Director of GTS. So Reggie, good to see you. I know we’re focusing here on energy, which really took center stage in the aftermath of Hurricane Ida. And of course, the drought that a large part of our country is currently going through in the West. What have you seen in terms of investor demand for ETFs that may be impacted by these two events?
REGGIE BROWNE: Well, I appreciate your inviting me today. You know, it’s amazing to see the aftermath of Hurricane Ida. The energy sector was already tearing against the S&P this year, but we are seeing more interest in this sector, and in particular the Energy Select ETF XLE, the First Trust Natural Gas ETFs, are dealing with this whole sector. with Ida disrupting the supply. chain will see gaps in the market and, therefore, could see higher prices. Much of it is driven by a few stocks, Chevron, Phillips 66, Pioneer and Devon Energy. So I think there is potential depending on what we see from the flows and then some of the views of some investors who are going into this market.
ALEXIS CHRISTOFOROUS: What about some of the – if you dig deeper into energy and oil, do you see a demand for, say, natural gas versus unconventional oil and gas? Where do you see the most interest right now?
REGGIE BROWNE: Well, we’re definitely seeing natural gas, but I think it’s really a supply issue. And I think you know, even though you see all this ESG pressure, you know, I think it’s just gasoline and oil to meet the demand for transportation. I think that’s where we see the bulk of the activity.
ALEXIS CHRISTOFOROUS: And I want to talk a little bit about what’s going on in the west right now and the drought that so many people are experiencing there. How is it in the ETF market and be specific if you can because our viewers love it when they can actually see specific ETFs our people are talking about.
REGGIE BROWNE: Yeah, absolutely. I mean, if you look at, for example, well, first of all, you know, I think drinking water and the water supply is under-represented in the news and what’s going on in the West. I mean, every day there’s an article about the water supply in California and Arizona and how some of the supplies are starting to go down and the rationing is going on.
And so, for example, Clean Water ETFs, one of Invesco, I think the ticker is PHO, for example, is an area that investors are starting to pile in. And then Global X launched a new ETF, the ticker is AQWA, and it’s around clean water. So I think as we get into a new mindset and new feelings for investors and you start to focus just on the drought that’s happening in the western US, the supply water and water and clean water will be more of a theme. And we are starting to see a slight uptick in this sector and especially among some investors.
ALEXIS CHRISTOFOROUS: And speaking of themes, I know ESG has been hot. Do you see that the demand for this type of ETF continues to be very strong?
REGGIE BROWNE: Listen, I think investors big and big and small love to invest in their belief systems and especially their value system to produce positive results. Many will be right if their wallets point in the same direction, but often they are not. I mean, a lot of investors who invest in ESG, their gasoline powered cars are still waiting in the parking lot for them, but I think even though EVs are going to grow, I think we are still 15 years away. critical mass is the early stages.
But I think ESG is important for a lot of investors and we see more and more ETFs being launched with the ESG theme and then ESG is more thematic about how investors think about it. But in reality, the new ESG ETFs are more focused on dynamic games. And they take a lot of market share because of it.
ALEXIS CHRISTOFOROUS: I want your opinion on this new ARK Invest ETF from Cathie Wood, I know they filed for a transparency themed ETF this week. And the fund is actually going to exclude certain sectors, including banking, gambling, alcohol, tobacco, some of the vices, I guess. If the SEC approves the fund, it would be the second ETF launched by ARK Invest this year alone. What do you think of this new transparency ETF and will the demand be there given the track record of Cathie Wood’s ARK innovation fund?
REGGIE BROWNE: Well I just think you’re starting to see natural growth in Cathie’s business. I know her well. It’s amazing to see his success around his visionary around SpaceX and Tesla. But as she grows her business and now adopts a third-party index to create an ETF, I think you are seeing natural growth in her business.
Now, if transparency around regulation, prosecution, compensation, is a real measure around ESG principles, we’ll wait and see that. And then when you start eliminating banks and chemicals, and other kinds of industries. You know that’s their point of view, will it produce positive results and positive returns for investors? We’ll wait and see this, but the ETF itself will be liquid as the underlying stocks inside are very liquid, but will it perform? I do not know.
But I think in terms of how Cathie chooses to grow her business, then in addition to her transparent active ETFs that she has in the market, which are now growing through indexation, you know, that’s is a novel and it’s something that’s realistic for her to do. But I’m not quite sure about transparency as an ESG metric. I think investors still want to stick with their value systems and eliminate fossil fuels, eliminate guns, or eliminate other stocks of sins that go against their long-term belief systems.
ALEXIS CHRISTOFOROUS: Okay, Reggie Browne, Director of GTS, thank you as always for talking a bit about ETFs with us. We appreciate that.