The hottest ETFs for 2021

Yahoo Finance’s Alexis Christoforous and Reggie Browne, principal at GTS, discuss the hottest ETFs heading into 2021.

Video Transcript

ALEXIS CHRISTOFOROUS: This was a monster year for exchange-traded funds. About $485 billion flowed into ETFs this year, and every indication points to a strong 2021.

Here with a look at some trends to watch out for in the new year is Reggie Browne, Principal at GTS. So, Reggie, before we look ahead to next year, let's just pause for a minute and take a look at the spectacular year 2020 has been for ETFs. I know that clean-energy ETFs were absolutely on fire this year, in part because President-elect Joe Biden's push for going greener. But what were some of the big trends, some of the big winners this year?

REGGIE BROWNE: Well look, any time the retail investor has the opportunity to be self-directed and make their own decisions, you know, ETFs provide that avenue, and I think that's what you're seeing.

The ETF industry is marching to a $25 trillion run rate of collecting assets, you know, within the next seven years. So I think, you know, it's all gangbusters.

I think the themes going forward and what we're seeing this year is really just around the future of everything. You know, I think Tesla was a big catalyst for investor interest, and you're seeing interest around the future of travel, the future of how we work.

And so, you know, the future of everything through innovation captured through ETFs I think will be very popular not only this year, as we see, but going forward in 2021. So President-elect Biden and his policies around green energy will be a catalyst for future innovation and growth in that sector.

ALEXIS CHRISTOFOROUS: OK, so that's a trend you see continuing because we've seen that sort of pick up steam this year. Some other areas that you like and you believe we're going to see a lot of activity in is biotech. Talk to me a little bit about that, and how did that sector do in terms of ETFs in 2020?

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REGGIE BROWNE: Well, I think-- well, first of all, if you look at how quick the scientists came to marketplace with the COVID-19 vaccine, I think we're seeing innovation around that, around mindset change. Jut like everything else, we're seeing what's possible, and I think that there will be additional investment in the biotech arena.

And if you look at the SPDR Biotech ETF, it's picked up a lot of speed, great performance this year. And it feels like that's going to be a trend next year because you have mindset change around investments in that particular sector.

You know, I mean, there's a lot of innovation, whether you're talking about neurology, whether you're talking about delivery of medicine. That all comes in into the biotech arena, and it's easy to capture those plays into a single ETF. And the SPDR ETF is just one of those plays in order to use it.

ALEXIS CHRISTOFOROUS: You also see innovation of capital raising continuing and, I guess, the popularity of the SPAC continuing into 2021. How's that going to play out in the ETF market?

REGGIE BROWNE: Well, I think let's step back. I think we've seen $81 billion raised via SPACs, so Special Purpose Acquisition Companies. And it's always been the desire of the commission and regulators to get mom-and-pop retail to participate in the capital formation of companies.

If you look at all these companies that have come to the marketplace-- Airbnb, even, you know, the private companies that came recently, all that market cap happened without retail participation. And now just what ETFs do now is allow mom-and-pop retail to play into that marketplace to participate in the capital formation of new companies, so SPACs.

And there's a new ETF that was brought out by Matt Tuttle and Defiance around capital raising, and it just launched a couple of weeks ago. I think that there's a trend to bring mom-and-pop retail into the marketplace.

So SPACs is one area that I think we'll see this first ETF, but a number of ETFs coming to the marketplace in order to allow retail participation.

ALEXIS CHRISTOFOROUS: All right, lots to look forward to there in the new year. Reggie Browne, principal at GTS, happy holidays to you.

REGGIE BROWNE: Well, same to you. Thanks for having me, and happy New Year to you.