| | Good morning and happy Wednesday. What is "exchange?" That question was the correct response to the Jeopardy answer of "ETF stands for this kind of traded fund, for the type of marketplace at which they can be bought and sold," and would've won a contestant in a recent episode $400. That represents the easiest question/answer for a category, though none of them got it (one tried "electronic"). The segment got some serious play on financial LinkedIn, with Bloomberg's Eric Balchunas posting it and asking, "Have we failed, or are we just early still?" Vanguard's social media was on the ball, posting its own Jeopardy-style matrix of answers in response. It probably goes without saying that none of the Jeopardy contestants were ETF Upside readers. Y'all should consider taking the game show's test and auditioning. | | | | | | | Photo by Getty Images via Unsplash | President Trump took a swipe at credit card issuers this week, vowing his administration wouldn't let consumers be "ripped off" by high interest rates and sending bank stocks and financial-sector ETFs skidding downward. Like many things in the Trump era, it's hard to tell what is noise and what is an actual threat to businesses. In this case, the president told credit card issuers to cap interest rates at 10% (about half the current average across the industry) or risk running afoul of the law. But it doesn't appear that there is any law at issue, and it would likely take Congressional approval to mandate any caps on interest rates. Nonetheless, the remarks add to the uncertainty banks are facing after a year of strong returns. "Since the president took office, we've really seen a strong rally in these large US banks," said Rene Reyna, head of thematic and specialty ETF strategy at Invesco. "A lot of that was around their ability to not only scale up and provide consistent revenue streams but also this idea around deregulation." Everyone Has a Limit It's unlikely that a credit card interest rate cap will happen in practice, but if it does somehow materialize, "it will have a significant impact on the earnings of banks and the ETFs that hold them," said Aniket Ullal, head of ETF research and analytics at CFRA Research. "These changes are likely to impact ETFs that hold stocks like Capital One that rely heavily on credit card earnings." The major credit card issuers tumbled, with Capital One down more than 10% over five days, Citigroup 5%, JPMorgan Chase 6%, American Express 7% and Bank of America 4%. Invesco's KBW Bank ETF (KBWB) slid 3% over five days. That $6 billion fund returned over 32% during 2025, more than twice the 15% of the S&P 500 Financials Index. "We've clearly seen investor demand, and we've had our best year in terms of flows," Reyna said, of the more than $2 billion the ETF brought in last year. Here's how some of the biggest financial-sector ETFs have performed: - State Street's $54 billion Financial Select Sector SPDR ETF (XLF) dropped 4% over the past five days after a 15% gain in 2025.
- Vanguard's $14 billion Financials ETF (VFH) declined 3% over five days after a 15% climb last year.
- The $4 billion iShares US Financials ETF (IYF) slipped 3% over five days, following an 18% increase last year.
  Banking on Diversification: Also shaking up the market for lenders' stocks are the White House's highly publicized pressure campaign on Federal Reserve Chair Jerome Powell and a proposal to limit financial institutions from continuing to buy single-family homes. The developments contribute to a strong case for diversification among financial services company holdings, Reyna noted. The credit card issue "is creating a little bit of noise in the market. The fundamental question here is, 'Can President Trump put this into law without legislative backing?'" he said. "As we are learning in his second term, there is a lot of testing the boundaries in terms of what he is able to do." Written by Emile Hallez | | | | | | | | | Photo via Betterment | For a limited time, new investing customers can get up to $1,500 with Betterment. Open any Betterment individual investing account (including an IRA) and make a deposit to earn up to $1,500. The more you invest, the more you can earn. Ready to put automated investing to work for you? Get started with Betterment today.*  | | | | | Imagine — a boat with two hulls. Preposterous! Oh, wait. Catamarans. Vanguard, the world's largest nautically themed asset manager, just separated into two investment units. The company's funds are now handled by either Vanguard Capital Management or Vanguard Portfolio Management, which are separate teams operating in different buildings. The division, completed this week, came about six months after Vanguard announced the pending establishment of the two US investment advisors, a process that it said was years in the making. "Vanguard has grown enormously, and splitting responsibilities creates clearer lines of accountability, more leadership roles and additional career paths for portfolio managers," Jeff DeMaso, editor of The Independent Vanguard Adviser, said in a note to clients about the change. "But it also introduces a real challenge: Can Vanguard maintain two world-class stock indexing teams without letting costs rise or performance slip?" Making Waves Two distinct investment management and stewardship teams is good news for clients and the firm, according to Vanguard. "Establishing separate investment management teams also creates a number of benefits for our investors and our organization, including management teams with an even deeper focus, investment teams with greater flexibility, and highly talented crew with more opportunities for growth," the company said in an announcement. "Additionally, the funds will benefit from streamlined operations for these high-performing teams." But it also alluded to a change affecting something that conservative groups and politicians have made a target of for several years: proxy voting. Vanguard, along with BlackRock, StateStreet and proxy advisory firms, have been criticized by Republican members of Congress over their alleged influence on corporate policies at the companies in their portfolios, particularly around environmental, social and governance issues. Having two investment stewardship teams will help "further diversify perspectives in the proxy voting ecosystem over time," Vanguard stated. Here's how the two separate investment management teams break down: - Vanguard Portfolio Management runs $2.7 trillion, DeMaso noted, among all actively managed stock funds (except diversified equity strategies), index funds (sector, style-box and dividend) and actively managed multi-asset funds.
- Vanguard Capital Management runs $8.2 trillion across all bond funds, active diversified equity, broad-market and foreign index funds and passive multi-asset funds such as the target-date suites.
Rocking the Boat: A nuance to the creation of two different teams is that there could possibly be tension, as some of the funds hold a lot of the same stocks, and the funds may compete for buying shares or could be on different sides of a trade, DeMaso said. "What happens if one team becomes faster, more efficient or simply better at trading than the other?" he said. "If Vanguard executes well, shareholders shouldn't notice a thing. But the task is not trivial: Vanguard now has to run two elite indexing operations while preserving its defining advantage — rock-bottom costs." Written by Emile Hallez | | | | | | | | | Hedge funds and holding companies were long an exclusive club. Now, exchange-traded funds are sneaking in the side door. ETFs are increasingly adopting strategies long associated with big-name investors as issuers look to package their investments into liquid, retail-friendly products. Most of these strategies replicate the structural elements of hedge fund investing, like futures-based exposure and options overlays. Some issuers now have several such funds, mimicking the holdings of Warren Buffett as well as hedge fund strategies from Bill Ackman, Stanley Druckenmiller and others. It's a growing trend in ETF investing that is trying to replicate the returns of the most famous investors on the planet. "We don't want to have any kind of voodoo magic in there," said Adam Patti, the CEO of VistaShares and manager of the Buffet copycat fund. "We just want to be very transparent." Trendsetters, Trend Followers Vistashares has brought three such funds to market in the past year alone. The company's VistaShares Target 15 Berkshire Select Income ETF (OMAH), which launched less than a year ago, uses covered calls to generate monthly income for shareholders using the top 20 publicly traded companies that Berkshire Hathaway owns, with the weightings reset quarterly and Berkshire always the top holding, at 10%. It also has a hefty expense ratio of 0.95%. "Typically, what you see is Berkshire lags in momentum markets, and it snaps back like a coiled spring in the value markets," Patti said. "So we'll be there with it." OMAH God. There are also funds looking to mimic hedge funds using trend-following, according to senior Morningstar analyst Dan Sotiroff, meaning they buy assets that have outperformed recently. The most common type of product that does this uses futures contracts. These contracts let managers take on short positions in certain asset classes and open the products up to more diverse types of investments, Sotiroff said. The two largest funds in the managed futures category are: "It's not just stocks and bonds. [Futures contracts allow managers to] get into things like commodities and currencies that you don't have explicit access to in other ETFs," Sotiroff said. "It's harder to use inside of an ETF, whereas there are futures contracts that do that exposure for you." Written by Lilly Riddle | | | | | - Pound for Pound: A look at weight-loss ETFs.
- Safe Harbor? Harbor's Commodity All-Weather Strategy ETF won over an institutional investor.
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