There may be an untapped market for exchange-traded funds.
According to Matt Kaufman of Calamos Investments, there are trillions of dollars sitting in certificates of deposit and money market accounts, and that’s the market ETFs should aim to capture.
“It’s larger than almost the entire ETF space,” the head of ETFs at CNBC’s “ETF Edge” told CNBC’s “ETF Edge” earlier this week. “There’s a lot of money to put into this.”
Kaufman, who believes interest rates will remain higher for an extended period of time, believes structured and options ETFs designed to manage risk and return can provide stability.
“We saw that it was difficult to get risk management and yield out of bonds when rates were so low,” he said. “Because rates have now come down… from zero to 4.5%, we can afford to provide capital protection for a certain period. And when you can do that, there are a lot of opportunities to use these products.”
Kaufman noted that ETFs in a higher rate environment could be especially useful for people looking to beat inflation, especially retirees.
“You may receive an amount greater than the risk-free rate. …Your money is tied to the market without more downside risk,” Kaufman added. “It’s all tax-deferred growth.”
Kaufman’s firm Calamos just launched a portfolio of 12 structured protection ETFs.