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BofA Securities does and seeks to do business with issuers covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
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Key takeaways
- After 30 years, $10tn AUM, & 10,000 launches, there's an ETF for everything. Active ETFs are the 3rd stage in a rich history.
- ETFs are cheap, transparent, liquid & accessible; the perfect vehicle to balance portfolios. ETFs have saved investors $250bn
- Well-designed funds lead by 6%/yr. BofA ETF Research has ratings on >400 funds in 58 categories to help investors find value.
ETFs have $10 trillion in assets and market dominance
Exchange-traded funds (ETFs) turn 30 this year and are only improving with age. In this primer, we explain what an ETF is, how the creation/redemption process works, and the fascinating story of a $10 trillion market born from the carnage of Black Monday, 1987.
ETF have saved investors $250bn
ETFs offer several key advantages. First, they help investors "add back" the diversification now missing from many stock and bond core portfolios; our Primer Picks report profiles six themes and 148 top-rated funds. Second, with lower fees and a tax-optimized structure, ETFs have saved investors more than $250bn since 2001. Third, ETFs offer greater liquidity, more transparency, and access to more markets.
The relentless hunt for diversification in three stages
We profile the stages in which the ETF universe has developed: 1. equity index funds for major regions and sectors; 2. fixed income and equity factors such as value and growth; 3. actively managed and alpha-seeking funds. The future of ETFs is bright given growth in non-US listings, institutional ownership, mutual fund conversions, and tokenization.
Using the right fund is critical; BofA ETF Ratings can help
Well-designed ETFs outperform their peers by 6% on average (Exhibit 44). BofA ETF Research rates >400 funds to identify which ones are best positioned in each category.
See page 2 for key statistics to know and page 3 for our favorite charts in one place…
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ETFs by the numbers
First, some statistics to reflect the variety and virtues of the ETF market:
- The first: SPY, the SPDR S&P 500 ETF Trust, was offered in 1993. It remains the largest, with $391bn of assets under management, and the most actively traded.
- The followers: there has been approximately one fund launched for every day since inception; fourteen thousand, eight hundred ten funds in 11,239 days.
- The assets: the global ETF market has $10.4tn in assets under management. It has been growing at a rate of 15% over the past five years and may surpass mutual fund assets by 2025. The size of the average fund is $1.1bn AUM.
- The averages: the average ETF is 7 years old, has $1.1bn in assets, has 251 holdings, and costs 0.16% per year to own.
- The diversification: the average correlation with the S&P 500 for a US listed equity ETF is 0.55. The average correlation for a bond ETF with the US Aggregate Bond benchmark is 0.48.
- The taxes: the creation/redemption process makes ETFs more tax-efficient for household investors, saving approximately $250bn vs. mutual funds since 2001. SPY has accumulated $329bn in tax-free capital gains since 2000.
- The liquidity: ETFs represent 31% of average daily equity market trading, with nine ETFs among the 21 most traded securities in the US. The average bid/ask spread is just 0.2%. Fixed income ETFs have improved price discovery and liquidity in the bond market, according to the SEC.
- The access: over 24,000 unique global stocks and 50,000 unique global bonds can be held using ETFs. Funds vary widely in complexity: GLD just owns physical gold, while a fund like ALTL alternates over time among multifactor strategies.
- The active: 95% of the global ETF market passively tracks an index, while 5% are actively managed. However, active funds account for 17% of inflows so far in 2023, up from 13% in 2022.
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ETFs in pictures
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 One basket to rule them all
Exchange-traded funds (ETFs) are the most common type of exchange-traded product. In the United States, ETFs are usually registered as open-end management companies under the Investment Company Act of 1940.1
ETFs work similarly for every asset class
An ETF is an investment company that owns some collection of assets such as stocks, bonds, or commodities. The choice of which assets to own is typically based on some index or investment strategy. ETF shares represent ownership in a basket of securities and the give investors a vote in how the fund is managed. Some equity ETF sponsors vote in shareholder meetings of the companies they own and have allowed ETF shareholders to participate in proxy voting.
Any asset class or investment strategy can be traded in an ETF structure. Exhibit 11 illustrates that ETFs might hold hundreds of stocks, thousands of bonds, a few commodity futures, or some combination of these. ETF designs range widely across and within asset classes.
Looks like a mutual fund, trades like a stock
Like mutual funds, ETFs pool investor capital. Like stocks, they can trade throughout the day on public exchanges. ETFs can also be sold short and may have derivatives like option contracts associated with the underlying fund. An ETF trades like an equity security regardless of the types of assets it holds.
Investors typically buy ETF shares on a public stock exchange while mutual fund shares are purchased from the fund sponsor (Exhibit 12). Other key differences between ETFs and mutual funds stem from nuances in the ETF creation and redemption process.
 The ETF creation & redemption process is the locus of innovation
ETF creation and redemption is a constant process that engages actors in the primary and secondary markets. Authorized participants (APs), usually an institutional investor like a broker-dealer, are the bridge between ETF providers and the investing public.
Exhibit 13 illustrates the six steps of the ETF creation process:
1. An investor places an ETF buy order. When the order is filled, the investor receives the shares immediately. The creation process begins if there are insufficient ETF shares available in the market.
2. The AP is alerted to the order and buys underlying securities on the market in accordance with the weights outlined in a "creation unit".
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In-kind transactions differentiate ETFs from other products
An in-kind transaction generally refers to an exchange of goods or services that is not measured in monetary terms. For example, most investors experience in-kind transactions when assets from one brokerage account are transferred to another, since the transfer is not taxed.
APs make intraday ETF pricing efficient by taking advantage of arbitrage opportunities if a fund's share price drifts from its net asset value (NAV). In-kind transactions do not trigger tax events, which increases the incentive for APs to stay engaged in the ETF creation & redemption process. ETF markets stay liquid, and the products are more tax efficient for shareholders as a result.
 Benefits of ETF ownership
ETFs can help investors balance portfolios at lower cost with more transparency & liquidity than other investment vehicles.
- Diversify
The world has changed: debt, demographics, and de-globalization are driving the shift from a 2% to 5% world. But most asset allocation models are ill-prepared for a "5% world" and are essentially unchanged from their settings five and ten years ago.
Underlying stock and bond indices have become too concentrated and passive investors are more exposed to growth stocks and interest rate sensitive bonds (Exhibit 14).
Five stocks comprised 15% of the Russell 1000 at the start of 2023 and have accounted for 50% of total returns in 2023 (Exhibit 15). Extreme concentration has worked this year (thanks, AI), but reversals can be painful (see The RIC Report: The Furious Fed and Five Lessons of the Nifty Fifty)
Add back diversification without selling core holdings
Portfolios that rely on benchmark indices need help diversifying. Investors can add ETFs across different asset classes to balance portfolios without selling core holdings.
- In fixed income, benchmarks like the US Aggregate Bond Index serve mostly as a wager on lower inflation, and interest rate risk in these benchmarks is near record highs, exposing them to a secular trend higher in yields (Exhibit 16). Investors can use credit ETFs to add balance (see A new bond strategy for the end of 60/40)
- In equities, 24 cents of every dollar into the S&P 500 goes to just 5 stocks (Exhibit 17). Energy and materials companies are underrepresented, and passive investors are taking large, perhaps unintentional risks in the tech sector. Improve balance in equity portfolios with equal weight, factor, and diversified international ETFs.
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Active allocation to passive funds > passive allocation to active funds
Portfolios with static allocations are agnostic to changes in the market cycle or global economy and are subject to index composition changes. Nimbler allocators can avoid those pitfalls without having to rely on active managers.
Less than 10% of active large cap US equity managers have outperformed their benchmark in the past decade and less than 5% have outperformed over the longer term (Exhibit 18). Picking active managers who outperform looks as difficult as picking stocks.
ETFs offer investors more allocation options than other investment vehicles (Exhibit 19). Some of our highest-conviction long-term investment themes (e.g., investing in quality and real assets) can be expressed more easily in ETFs.
- Pay less
Lower expense ratios and lower tax burdens are two major cost efficiencies that significantly boost net returns for ETF investors. Annual all-in costs for ETFs are 1.2% lower than mutual funds (Exhibit 21).
ETF expense ratios are >60% cheaper than mutual funds on average
The average ETF costs 16bps per year compared to 44bps for mutual funds. The surge in ETF popularity has put downward pressure on expense ratios with some of the largest funds costing just 0.03% per year.
Tax efficiency has saved US ETF investors $250bn
ETFs are more tax efficient than mutual funds thanks to the creation & redemption process described above. Sometimes, mutual funds must sell assets to meet redemption requests. Any realized capital gains from sales must then be distributed to shareholders.
For example, an investor who bought $100,000 of an S&P 500 ETF in October 2013 would have $279,000 today, compared to just $248,000 if the investment was in an S&P 500 mutual fund. Tax efficiencies account for $24,100 of savings with another $6,700 from lower expenses, totaling 30% of the original investment (Exhibit 20).
These savings scale up for investors in all tax brackets. We estimate that ETFs have helped save investors $250bn in taxes, even when accounting for the 57% of mutual funds currently held in tax-sheltered accounts by US households.
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- Know what you own
ETFs are more transparent than mutual funds and offer better liquidity, benefitting long term investors and active traders alike. Exhibit 22 shows the difference between ETFs and mutual funds along 5 distinct transparency metrics:
- Holdings transparency: descriptions of ETF holdings are easily accessible on most fund sponsor websites and are updated daily.
- Price transparency: ETFs trade intraday on public exchanges, so investors always know the price. ETFs can deviate from NAV, but the deviation is known in real time.
- Tax transparency: ETF shareholders have more control over taxable events. Year-end tax burdens are not influenced by flows from other investors in the fund.
- Access transparency: the minimum investment for an ETF is the share price. The average ETF share price is $160.
- Fee transparency: ETF sponsors charge an expense ratio assessed annually.
ETF markets are deep, liquid, and inexpensive
ETFs have introduced liquidity into parts of the market where it was lacking before. For example, some corporate bonds may not trade for many days, while small cap or international stocks might have thin liquidity. Investors are often more comfortable owning some these asset classes when they are in a diversified, liquid ETF.
Nine ETFs are among the 21 most traded securities in the US, with SPY recording the highest daily value traded of any security (Exhibit 23). Fixed income (HYG, TLT, LQD) and gold (GLD) ETFs are also highly traded, illustrating the demand for liquid cross-asset products.
Falling bid-ask spread suggest that ETF markets are getting deeper. The cap-weighted bid-ask spread for the entire ETF market is just 0.2%, 2.5x lower than it was 20 years ago (Exhibit 24).
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A brief history of the ETF universe
The US Securities and Exchange Commission prompted the idea of modern ETFs in their 840-page postmortem of the October 1987 "Black Monday" stock crash. The market fell 22% in a single day as selling from popular portfolio insurance programs exacerbated market volatility. The SEC suggested that volatility could have been lower if there had been a single product for trading baskets of stocks.2
Nate Most and Steven Bloom, working at the American Stock Exchange, pioneered the ETF structure. The first filing for an S&P 500 ETF was submitted in 1989. The SEC approved the application four years later and SPY, the SPDR S&P 500 ETF trust, began trading in January 1993.
The search for diversification: three decades, three stages
In one sense, all of investing is about the search for diversification: uncorrelated assets offering big returns. ETF growth has been explosive because no product has ever offered such simple, cost-effective, and liquid access to diversified asset classes.
ETF offerings have evolved as the sources of uncorrelated returns have shifted over time. 10,000 ETFs have existed since 1993, with >9,000 available today accounting for over $10tn in total assets. Exhibit 25 illustrates the three distinct stages of ETF growth:
- Stage 1: Equity index trackers (1993 to 2008): SPY ushered in the era of large equity index ETFs. Initially, ETFs were seen as mutual funds that could trade intraday and were familiar to investors who'd been using traditional index funds. Investors also gained ETF access to international equities & equity sectors.
- Stage 2: Fixed income, commodity, and factor ETFs (2008 to 2019): Broad index equity funds proved there was appetite for ETFs. The next evolution for equity funds came with ETFs focused on factors such as value and growth. Fixed income ETFs were first listed in 2002 and surpassed $500bn in assets in 2016.
Stage 3: Alpha and active ETFs (2019 to today): ETF sponsors began to build on factor portfolios, creating more nuanced screens and specialized indexes with a deliberate goal to outperform benchmarks. The SEC's adoption of rule 6c-11 in 2019 helped revive interest in active ETFs. The rule provides more flexibility for sponsors by allowing custom creation units and giving the option to use proxy portfolios for a fund's daily disclosure requirements.
Fund flows and launches help identify ETF market stages
Investors have rapidly adopted new ETF structures. Flows into index ETF were more than double the starting assets after just 5 years (Exhibit 26). Fixed income and factor funds saw equally rapid adoption, with active & alpha ETF inflows still surging.
Based on the number of fund launches, index ETFs dominated the market for 15 years, but by 2008, they only accounted for half of global launches (Exhibit 27). Interest shifted decisively to fixed income and factor funds in the 2010s. Active and alpha ETFs have grown from 10% of global fund launches in 2013 to 20% in 2023.
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Equity ETFs account for 47% of total equity fund assets and are expected to surpass mutual funds by 2025 (Exhibit 28). Fixed income ETFs are 29% of total bond fund assets across ETFs and mutual funds, from 12% just 10 years ago.
Most ETFs hold equities
80% of global ETF assets are in US and international equity funds (Exhibit 29). Fixed income ETFs comprise another $2tn of assets with money market funds, commodities, and alternative ETFs collectively accounting for $0.5tn.
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Equity ETF market cap has surged >300% in the past decade compared to 92% for total equity market cap. Inflows reveal unrelenting interest from investors.
Where equity ETF assets are today
- Broad US equity indices: Nearly half of all US equity ETF assets are in large cap index funds that track benchmarks like the S&P 500 (SPY), Dow Jones Industrial Average (DIA), and Nasdaq (QQQ). Another 30% of US equity assets follow all-cap equity benchmarks and large cap factor indices like growth and value. 20% is spread across SMID cap funds (Exhibit 34).
- US equity sectors: Equity sector ETFs account for nearly $650bn in total assets (Exhibit 31). Tech funds like VGT account for >30% of total AUM, mirroring the sector's weight in the benchmark index.
- International equities: Equity ETFs with exposure outside the US account for about $3tn in AUM (Exhibit 32). Broad developed markets ex-US (EFA) and global ex-US (MXWD) comprise half of the total. Emerging market ETFs like EEM have amassed $485bn with another $400bn in Chinese equities.
Equity index ETF leaders & laggards over the past decade
The S&P 500 has returned 12% on an annual basis since 2013 but ETFs outside the benchmark have seen a huge range of returns (Exhibit 33).
- XPH, the SPR S&P Pharmaceuticals ETF, was the best performer in 2013 (+61%) and the worst performer three years later (-23%).
- EWZ lost 42% in 2015 and rebounded to the top spot in 2016 (+64%).
- Energy ETFs were the worst performing equity funds in 2020 (-33%) as energy demand evaporated only to see natural gas nearly double in 2021.
- IYW, the iShares US Technology ETF, has led equity funds in 2023 (38%) after similar tech fund, XNTK, lagging everything in the 2022 inflation shock (-41%).
Stage 2: FICC & factor funds
Investor attention turned to equity factor and fixed income funds in the mid-2000s as correlations among sector and international equity benchmarks rose. Investors have poured nearly $3tn into fixed income and factor equity funds since the early 2000s.
Equity factor funds: equity index funds with a twist
Products like US value and growth ETFs were more familiar to investors as these factors had accepted benchmarks that could be easily replicated and passively managed:
- Large cap factor funds like VTV for value and VUG for growth have $1.4tn in AUM.
- SMID cap factor funds range from size (IWM) to factor tilts like small cap value (VBR) and mid cap growth (IWP).
Fixed income ETFs help credit markets function
Bond ETFs have increased liquidity and improved the process of price discovery in cash bond markets since their inception in the early 2000s.
- US fixed income ETFs have surpassed $1.9tn in assets (Exhibit 35).
- Government bond ETFs like TLT and IEF have garnered >$430bn in assets.
- Corporate bond funds like LQD and HYG have nearly $350bn in assets while ETFs that track the Bloomberg US Aggregate Bond Index have $320bn.
- Other credit funds like preferreds (PFF) have less than $50bn.
The SEC concluded that fixed income ETFs "functioned as expected" during the March 2020 selloff, "allowing investors to transfer diversified bond risk on the secondary market without transacting directly in the underlying bonds."3 The ringing endorsement is a vindication of the SEC's original suggestion after Black Monday.
Fixed income index ETF leaders & laggards over the past decade
The US aggregate bond index has returned 0.73% on an annual basis since 2013 and bond market volatility has picked up significantly in the past few years (Exhibit 36).
- EDV, Vanguard's Extended Duration Treasury ETF, was the top bond performer in 2014 (+45%) but has struggled in the past two years as yields moved sharply higher.
- EM local currency bonds (EMLC and LEMB) were the worst performers in 2015, 2018, and 2021 as dollar strength eroded returns.
- Convertible bonds (CWB and ICVT) were top performers in 2013 and 2020 thanks in part to higher equity market sensitivity.
Stage 3: Active & alpha funds
Active and "alpha" ETFs define the current stage of ETF evolution. Cross-asset correlations have risen over the past decade and investors are looking for more diversified options to outperform benchmarks.
Every asset class has an active ETF
Active ETFs are a departure from traditional passively managed index funds. Managers typically trade more frequently, and most active funds do not track an underlying index. The SEC 6c-11 rule change in 2019 made it possible for ETF providers to create custom creation units which revived market interest in actively managed ETFs. Active ETFs have nearly $418bn in assets (Exhibit 37):
- Active equity ETFs have around $230bn in assets with Dimensional's US core Equity 2 ETF (DFA) accounting for >$20bn. ARK funds like the ARK Innovation ETF (ARKK) have also grown in popularity in the past few years.
- Active fixed income ETFs account for about $183bn in assets with J.P. Morgan's Ultra-Short Income ETF claiming $23bn.
'Alpha' ETFs are the natural evolution from 'smart beta' factor funds
Our definition of "alpha" ETFs includes any fund that builds on traditional factors with proprietary screening methods or novel weighting criteria. Multifactor and thematic funds are also included:
- Alpha equity ETFs total to $86bn in assets. This group includes multifactor funds combining value, momentum, profitability (BMVP) and strategies that vary exposure dynamically based on the economic cycle (OMFL). A fund like COWZ illustrates well the evolution of ETFs from a broad benchmark, to a factor tilt, to a nuanced strategy incorporating that factor. COWZ tracks an index developed by its sponsor that screens for stocks with high free cash flow yield. The screen is an evolution of the broad MSCI quality factor, which looks more like an S&P 500 tracker most of the time (Exhibit 38).
- Alpha fixed income ETFs have $7bn in assets with BBAG as the largest fund. Thematic fixed income ETFs have $60bn in assets.
- Inverse, leveraged, and option ETFs range from leveraged index funds like TQQQ to actively managed option strategies (e.g., JEPI, PFIX) to passively managed option strategies like QYLD.
Active & Alpha ETF leaders & laggards over the past decade
- TAN, the Invesco Solar ETF, returned >120% in 2013 and >230% in 2020. It's the worst performer in 2023 so far, down 43%.
- Multi-factor funds have outperformed in multiple years (i.e., PBE in 2014, FBZ in 2016, XSD in 2019, and PXJ in 2022).
- Some active funds have run into trouble over the past decade (i.e., ELD in 2013, NBCM in 2015, AMZA in 2017, AADR in 2018, and OILK in 2020).
 The future looks bright for ETFs
As the ETF market grows, we see at least seven big trends for investors to monitor:
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- Mutual funds and SMAs are converting to ETFs
More than 50 mutual funds have converted to ETFs since the first conversion in 2021, as investors continue to seek tax efficient investment vehicles. Bloomberg estimates that $1tn of mutual fund assets could be converted over the next decade.
Mutual funds can also add ETF share classes to offerings since a Vanguard patent has recently expired. But the ETF structure might not work optimally if it's linked to mutual fund flows. SMAs are also starting to convert to ETFs as liquidity attracts sponsors into the market.
- ETFs broaden to alternatives, cryptocurrency, single stock
- Cryptocurrency ETFs today hold futures instead of the actual tokens. There are at least eight filings currently with the SEC for an ETF that would hold bitcoin. If approved, spot cryptocurrency ETFs would allow investors to obtain direct exposure via an exchange-listed product. The SEC has rejected past applications for spot bitcoin ETFs. But the agency recently decided not to appeal a court ruling that said it was wrong to reject an application from Grayscale Investments to convert its bitcoin trust to an ETF.
- Funds that follow alternative strategies, such as managed futures, long-short equity, and more complex fixed income strategies are also starting to grow.
- Single stock ETFs have launched in the past few years and are typically leveraged, or inverse leveraged. For example, the AXS 2X NKE Bull Daily ETF (NKEL) aims for two times the daily return of Nike stock. If Nike rises 2% on a given day, the ETF is supposed to rise 4%.
- Non-transparent ETFs are like exchange traded mutual funds
Active non-transparent funds are actively managed ETFs that disclose holdings on a quarterly basis instead of daily. Non-transparent funds would mitigate 'copycat risk' with delayed disclosures while retaking the ETF wrapper and tax efficiency. The space is still relatively small with about $7bn in AUM but could attract flows if performance is strong.
 Which ETFs to own…and how
For example, RTH, the VanEck Retail ETF, is market-cap weighted and its top five holdings are half of its weight (Exhibit 45). Amazon is nearly 20% of the fund.
HYG, the industry standard for high yield bond exposure, has underperformed ETF peers by as much as 150bps per year since 2018 (Exhibit 46). Fallen angel ETFs, the group leaders, hold mostly BB-rated bonds which have offered investors better absolute and risk-adjusted returns over the very long run. Fallen angels have almost no exposure to lower quality credit debt by design which helps to explain better long-run returns.
3. Currency risks
Currency fluctuations can significantly impact US investors with allocations to international stocks or bonds. Unhedged ETFs are exposed to currency risks even if the fund is bought on a US exchange.
Currency-hedged ETFs can help mitigate currency risk, especially when there are sharp moves in the dollar. The three hedged Japan equity ETFs have outperformed unhedged Japan equity funds by 8-10% annually over the past five years (Exhibit 47). Recent weakness in the Japanese Yen has weighed on the unhedged ETFs.
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BofA ETF ratings model identifies the best fund designs
Understanding ETF rating components
Exhibit 49 narrates ETF rating inputs at they appear in our all our ratings tables. Funds receive a total score out of a potential 100 based on metrics in three categories:
- Efficiency: includes expense ratio, fund tracking error, and liquidity metrics like average bid/ask spread and daily value traded.
- Technical: includes price momentum factors and risk-adjusted returns based on the Sortino ratio (returns relative to downside volatility)
- Fundamental: ranks funds based on BofA Buy-rated stock exposure relative to Underperform-rated stocks. Category-specific fundamental criteria may also be used like thematic stock exposure in each fund.
Total score: Funds are rated on a 100-point scale. Each category has points available equivalent to the category's weight in the ranking. For example, if Efficiency is 33% of the overall score, a fund could achieve a maximum of 33 points in the category. Funds are ranked against each other to determine the number of points received per category. The scores for each category are then summed to arrive at the total score.
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Efficiency factors:
- Expense ratio: the "all-in" net-expenses of a fund including management, interest, listing fees etc. as a percent of net assets under management. The cheapest fund is not always the best fund in our model. Expense ratios can be crucial differentiators in categories like gold ETFs where fund construction is nearly identical.
- Net asset value (NAV) tracking error: the difference in actual performance of a fund relative to its corresponding benchmark. A small tracking error means that a portfolio manager tracks their benchmark closely. Liquidity of underlying assets and the stated investment goal of individual funds can influence tracking error.
- Average daily value traded ($mn): the average number of shares traded daily multiplied by the price that they traded at over the past three months. A higher number indicates greater liquidity in the secondary market. Funds with an average value traded greater than the group's average receive a higher Efficiency score.
- Bid/Ask spread: the average difference, or spread, between bid and ask prices as a percentage of the price. A lower spread signals a more liquid, and efficient, fund.
Technical factors:
- Price momentum: three simple moving averages are used to calculate price momentum. We weight and sum the percent that a fund's closing price is above or below each moving average. Higher prices relative to the moving averages means stronger momentum.
- Sortino ratio: measures risk-adjusted returns by comparing average annualized returns to downside deviation over the same period. Funds with high historical risk-adjusted returns receive a higher rank.
Fundamental factors:
- Stock exposure ratio: bottoms-up analysis using BofA analyst ratings. We subtract the fund weight of Underperform-rated stocks from the fund weight of Buy-rated stocks and divide by the total weight of BofA covered stocks within an ETF. A higher ratio means a fund has more Buy-rated exposure.
ETF exposure to Buy rated stocks (%) - ETF exposure to Underperform rated stocks
Total ETF exposure to all BofA rated stocks (%)
ETF valuation takes novel approach to find opportunity
Our Composite Valuation measure for equity ETFs uses 12-month forward estimates for P/E, P/B, EV/EBITDA, and P/FCF. These metrics are calculated using consensus estimates for individual stocks and aggregated using the appropriate weights for each fund (see The ETF Angle: ETF Valuation: what to buy, what to bypass).
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1Some of the earliest ETFs like SPY were structured as unit investment trusts (UIT) which require managers to attempt to fully replicate the underlying index by owning every security in the index. Grantor trusts, which are registered under the Securities Act of 1933, but not the Investment Company Act of 1940, are usually reserved for commodity funds like GLD.
2 See Eric Balchunas' 2016 report The ETF Files: How the US government inadvertently launched a $3 trillion industry for more on the ETF origin story.
3 US Credit Markets: Interconnectedness and the Effects of the COVID-19 Economic Shock, SEC Division of Economic and Risk Analytics October 2020
 Important Disclosures
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R1 Exchange-traded funds (ETFs), or the ETF providers, that were investment banking clients of BofA Securities or one of its affiliates within the past 12 months. For purposes of this Investment Rating Distribution, the coverage universe includes only ETFs. An ETF rated 1-FV is included as a Buy; an ETF rated 2-FV, 3-FV, 1-NV, 2-NV, 3-NV, 1-UF or 2-UF is included as a Hold; and an ETF rated 3-UF is included as a Sell.
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EXCHANGE-TRADED FUNDS (ETF) INVESTMENT OPINION KEY: Opinions reflect both an Outlook Rating and a Category Rating. OUTLOOK RATINGS reflect the analyst's assessment of the ETF's attractiveness relative to other ETFs within its category (including sector, region, asset class, thematic, and others). There are three outlook ratings: 1 - the ETF is more attractive than covered peers in the same category over the next 12 months; 2 - the ETF is similarly attractive to covered peers in the same category over the next 12 months; and 3 - the ETF is less attractive than covered peers in the same category over the next 12 months. CATEGORY RATINGS, indicators of the analyst's view of the ETF's category and which incorporate published views of BofA Global Research department analysts, are: FV - Favorable view, NV - Neutral view and UF - Unfavorable view.
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Price Charts for the securities referenced in this research report are available on the Price Charts website, or call 1-800-MERRILL to have them mailed.
BofAS or one of its affiliates acts as a market maker for the equity securities recommended in the report: 1st Trust Financ ETF, 1st Trust Indus Fund, 1st Trust Mater ETF, 1st Trust Techn ETF, ALPS Disruptive Tech, FirstTrust SmCap ETF, FlexShares Qual LC, Franklin Canada ETF, FT STX EUROPE ETF, Global X AI & Tech, Hartford Dev Mkt ETF, Inv DWA EnrgMomentum, Invesco Cons ETF, Invesco DWA ETF, Invesco Intl Div, Invesco Int'lBuyback, Invesco S&P EWU ETF, Invesco Wh Cln Ener, InvescoSP500 PureVal, iShares ACWI ex US, iShares Canada ETF, iShares Chile ETF, iShares Cons Srv ETF, iShares Core S&P ETF, iShares Currency ETF, iShares Div&Buyback, iShares Edg MSCI ETF, iShares EM ex China, iShares Global Clean, iShares India SC ETF, iShares JPX-NIKK ETF, iShares Material ETF, iShares Mexico ETF, iShares MSCI HK ETF, iShares S&P 100 ETF, iShares S&P 500 ETF, iShares S&P Mid ETF, iShares Saudi Arabia, iShares US, iShares-DJ Telecom, KraneS CHINA ETF, Pacer US S Cap C Cow, Pacer USCashCows ETF, Schwab L Cap Grw, Schwab US Large ETF, Schwab US MidCap ETF, Schwab US REIT ETF, SPDR Comm Serv ETF, SPDR Energy ETF, SPDR EuroStoxx50 ETF, SPDR Financ ETF, SPDR Healthca ETF, SPDR High Div ETF, SPDR Industr ETF, SPDR REIT ETF, SPDR Tech ETF, SPDR Utilities ETF, VanEck Vietnam ETF, Vanguard Cons ETF, Vanguard ESG US, Vanguard Intl Div, Vanguard Int'l ESG, Vanguard Value ETF, Vanguard World ex US, WSDTRE JPN Hdg ETF, WT Ex-Val ETF, WTree India Earnings, Xtrackers EM Hdg ETF.
BofAS or an affiliate was a manager of a public offering of securities of this issuer within the last 12 months: BlackRock, Inc., Charles Schwab, State Street.
The issuer is or was, within the last 12 months, an investment banking client of BofAS and/or one or more of its affiliates: BlackRock, Inc., Charles Schwab, Deutsche Bank, Franklin Resources, Invesco, Northern Trust Corpo, SS&C Technologies Ho, State Street, The Hartford, WisdomTree.
BofAS or an affiliate has received compensation from the issuer for non-investment banking services or products within the past 12 months: BlackRock, Inc., Charles Schwab, Deutsche Bank, Franklin Resources, Invesco, Krane Funds Advisors, MiraeAsset Sec, Northern Trust Corpo, Pacer Advisors, SS&C Technologies Ho, State Street, The Hartford, Vaneck, Vanguard Group Inc, WisdomTree.
The issuer is or was, within the last 12 months, a non-securities business client of BofAS and/or one or more of its affiliates: BlackRock, Inc., Charles Schwab, Deutsche Bank, Franklin Resources, Invesco, Krane Funds Advisors, MiraeAsset Sec, Northern Trust Corpo, Pacer Advisors, SS&C Technologies Ho, State Street, The Hartford, Vaneck, Vanguard Group Inc, WisdomTree.
BofAS or an affiliate has received compensation for investment banking services from this issuer within the past 12 months: BlackRock, Inc., Charles Schwab, Franklin Resources, Invesco, Northern Trust Corpo, SS&C Technologies Ho, State Street, The Hartford, WisdomTree.
BofAS or an affiliate expects to receive or intends to seek compensation for investment banking services from this issuer or an affiliate of the issuer within the next three months: BlackRock, Inc., Charles Schwab, Deutsche Bank, Franklin Resources, Invesco, Northern Trust Corpo, SS&C Technologies Ho, State Street, The Hartford, WisdomTree.
BofAS together with its affiliates beneficially owns one percent or more of the shares of this fund. If this report was issued on or after the 9th day of the month, it reflects the ownership position on the last day of the previous month. Reports issued before the 9th day of the month reflect the ownership position at the end of the second month preceding the date of the report: 1st Trust Financ ETF, 1st Trust Indus Fund, 1st Trust Mater ETF, 1st Trust Techn ETF, ALPS Disruptive Tech, FirstTrust SmCap ETF, Franklin Canada ETF, FT STX EUROPE ETF, Global X AI & Tech, Hartford Dev Mkt ETF, Inv DWA EnrgMomentum, Invesco Cons ETF, Invesco DWA ETF, Invesco Intl Div, Invesco Int'lBuyback, Invesco S&P EWU ETF, Invesco Wh Cln Ener, InvescoSP500 PureVal, iShares ACWI ex US, iShares Canada ETF, iShares Cons Srv ETF, iShares Core S&P ETF, iShares Div&Buyback, iShares Edg MSCI ETF, iShares EM ex China, iShares Global Clean, iShares India SC ETF, iShares JPX-NIKK ETF, iShares Material ETF, iShares Mexico ETF, iShares S&P 100 ETF, iShares S&P 500 ETF, iShares S&P Mid ETF, iShares Saudi Arabia, iShares US, iShares-DJ Telecom, Pacer US S Cap C Cow, Pacer USCashCows ETF, SPDR Comm Serv ETF, SPDR Energy ETF, SPDR EuroStoxx50 ETF, SPDR Financ ETF, SPDR Healthca ETF, SPDR High Div ETF, SPDR Industr ETF, SPDR REIT ETF, SPDR Tech ETF, SPDR Utilities ETF, Vanguard Cons ETF, Vanguard Intl Div, Vanguard Value ETF, Vanguard World ex US, WSDTRE JPN Hdg ETF, Xtrackers EM Hdg ETF.
BofAS or one of its affiliates is willing to sell to, or buy from, clients the common equity of the issuer on a principal basis: 1st Trust Financ ETF, 1st Trust Indus Fund, 1st Trust Mater ETF, 1st Trust Techn ETF, ALPS Disruptive Tech, FirstTrust SmCap ETF, FlexShares Qual LC, Franklin Canada ETF, FT STX EUROPE ETF, Global X AI & Tech, Hartford Dev Mkt ETF, Inv DWA EnrgMomentum, Invesco Cons ETF, Invesco DWA ETF, Invesco Intl Div, Invesco Int'lBuyback, Invesco S&P EWU ETF, Invesco Wh Cln Ener, InvescoSP500 PureVal, iShares ACWI ex US, iShares Canada ETF, iShares Chile ETF, iShares Cons Srv ETF, iShares Core S&P ETF, iShares Currency ETF, iShares Div&Buyback, iShares Edg MSCI ETF, iShares EM ex China, iShares Global Clean, iShares India SC ETF, iShares JPX-NIKK ETF, iShares Material ETF, iShares Mexico ETF, iShares MSCI HK ETF, iShares S&P 100 ETF, iShares S&P 500 ETF, iShares S&P Mid ETF, iShares Saudi Arabia, iShares US, iShares-DJ Telecom, KraneS CHINA ETF, Pacer US S Cap C Cow, Pacer USCashCows ETF, Schwab L Cap Grw, Schwab US Large ETF, Schwab US MidCap ETF, Schwab US REIT ETF, SPDR Comm Serv ETF, SPDR Energy ETF, SPDR EuroStoxx50 ETF, SPDR Financ ETF, SPDR Healthca ETF, SPDR High Div ETF, SPDR Industr ETF, SPDR REIT ETF, SPDR Tech ETF, SPDR Utilities ETF, VanEck Vietnam ETF, Vanguard Cons ETF, Vanguard ESG US, Vanguard Intl Div, Vanguard Int'l ESG, Vanguard Value ETF, Vanguard World ex US, WSDTRE JPN Hdg ETF, WT Ex-Val ETF, WTree India Earnings, Xtrackers EM Hdg ETF.
The issuer is or was, within the last 12 months, a securities business client (non-investment banking) of BofAS and/or one or more of its affiliates: BlackRock, Inc., Charles Schwab, Deutsche Bank, Franklin Resources, Invesco, Krane Funds Advisors, MiraeAsset Sec, Northern Trust Corpo, Pacer Advisors, SS&C Technologies Ho, State Street, The Hartford, Vaneck, Vanguard Group Inc, WisdomTree.
Due to the nature of strategic analysis, the issuers or securities recommended or discussed in this report are not continuously followed. Accordingly, investors must regard this report as providing stand-alone analysis and should not expect continuing analysis or additional reports relating to such issuers and/or securities.
BofA Global Research personnel (including the analyst(s) responsible for this report) receive compensation based upon, among other factors, the overall profitability of Bank of America Corporation, including profits derived from investment banking. The analyst(s) responsible for this report may also receive compensation based upon, among other factors, the overall profitability of the Bank's sales and trading businesses relating to the class of securities or financial instruments for which such analyst is responsible.
BofAS and/or its affiliates participate in the creation and redemption of these ETFs and are an authorized participant for such ETFs: 1st Trust Financ ETF, 1st Trust Indus Fund, 1st Trust Mater ETF, 1st Trust Techn ETF, FirstTrust SmCap ETF, FlexShares Qual LC, FT STX EUROPE ETF, Hartford Dev Mkt ETF, Inv DWA EnrgMomentum, Invesco Cons ETF, Invesco DWA ETF, Invesco Intl Div, Invesco Int'lBuyback, Invesco S&P EWU ETF, Invesco Wh Cln Ener, InvescoSP500 PureVal, iShares ACWI ex US, iShares Canada ETF, iShares Chile ETF, iShares Cons Srv ETF, iShares Core S&P ETF, iShares Currency ETF, iShares Div&Buyback, iShares Edg MSCI ETF, iShares EM ex China, iShares Global Clean, iShares India SC ETF, iShares JPX-NIKK ETF, iShares Material ETF, iShares Mexico ETF, iShares MSCI HK ETF, iShares S&P 100 ETF, iShares S&P 500 ETF, iShares S&P Mid ETF, iShares Saudi Arabia, iShares US, iShares-DJ Telecom, KraneS CHINA ETF, Pacer US S Cap C Cow, Pacer USCashCows ETF, Schwab L Cap Grw, Schwab US Large ETF, Schwab US MidCap ETF, Schwab US REIT ETF, SPDR EuroStoxx50 ETF, SPDR High Div ETF, Vanguard Cons ETF, Vanguard ESG US, Vanguard Intl Div, Vanguard World ex US, WSDTRE JPN Hdg ETF, WT Ex-Val ETF, WTree India Earnings, Xtrackers EM Hdg ETF
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Other Important Disclosures
The covered issuer and/or one or more of its affiliates holds 5% or more of the total issued share capital of Bank of America Corporation: BlackRock, Inc., Vanguard Group Inc.
Prices are indicative and for information purposes only. Except as otherwise stated in the report, for any recommendation in relation to an equity security, the price referenced is the publicly traded price of the security as of close of business on the day prior to the date of the report or, if the report is published during intraday trading, the price referenced is indicative of the traded price as of the date and time of the report and in relation to a debt security (including equity preferred and CDS), prices are indicative as of the date and time of the report and are from various sources including BofA Securities trading desks.
The date and time of completion of the production of any recommendation in this report shall be the date and time of dissemination of this report as recorded in the report timestamp.
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Recipients who are not institutional investors or market professionals should seek the advice of their independent financial advisor before considering information in this report in connection with any investment decision, or for a necessary explanation of its contents.
Officers of BofAS or one or more of its affiliates (other than research analysts) may have a financial interest in securities of the issuer(s) or in related investments.
Refer to BofA Global Research policies relating to conflicts of interest.
"BofA Securities" includes BofA Securities, Inc. ("BofAS") and its affiliates. Investors should contact their BofA Securities representative or Merrill Global Wealth Management financial advisor if they have questions concerning this report or concerning the appropriateness of any investment idea described herein for such investor. "BofA Securities" is a global brand for BofA Global Research.
Information relating to Non-US affiliates of BofA Securities and Distribution of Affiliate Research Reports:
BofAS and/or Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S") may in the future distribute, information of the following non-US affiliates in the US (short name: legal name, regulator): Merrill Lynch (South Africa): Merrill Lynch South Africa (Pty) Ltd., regulated by The Financial Service Board; MLI (UK): Merrill Lynch International, regulated by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA); BofASE (France): BofA Securities Europe SA is authorized by the Autorité de Contrôle Prudentiel et de Résolution (ACPR) and regulated by the ACPR and the Autorité des Marchés Financiers (AMF). BofA Securities Europe SA ("BofASE") with registered address at 51, rue La Boétie, 75008 Paris is registered under no. 842 602 690 RCS Paris. In accordance with the provisions of French Code Monétaire et Financier (Monetary and Financial Code), BofASE is an établissement de crédit et d'investissement (credit and investment institution) that is authorised and supervised by the European Central Bank and the Autorité de Contrôle Prudentiel et de Résolution (ACPR) and regulated by the ACPR and the Autorité des Marchés Financiers. BofASE's share capital can be found at www.bofaml.com/BofASEdisclaimer; BofA Europe (Milan): Bank of America Europe Designated Activity Company, Milan Branch, regulated by the Bank of Italy, the European Central Bank (ECB) and the Central Bank of Ireland (CBI); BofA Europe (Frankfurt): Bank of America Europe Designated Activity Company, Frankfurt Branch regulated by BaFin, the ECB and the CBI; BofA Europe (Madrid): Bank of America Europe Designated Activity Company, Sucursal en España, regulated by the Bank of Spain, the ECB and the CBI; Merrill Lynch (Australia): Merrill Lynch Equities (Australia) Limited, regulated by the Australian Securities and Investments Commission; Merrill Lynch (Hong Kong): Merrill Lynch (Asia Pacific) Limited, regulated by the Hong Kong Securities and Futures Commission (HKSFC); Merrill Lynch (Singapore): Merrill Lynch (Singapore) Pte Ltd, regulated by the Monetary Authority of Singapore (MAS); Merrill Lynch (Canada): Merrill Lynch Canada Inc, regulated by the Investment Industry Regulatory Organization of Canada; Merrill Lynch (Mexico): Merrill Lynch Mexico, SA de CV, Casa de Bolsa, regulated by the Comisión Nacional Bancaria y de Valores; Merrill Lynch (Argentina): Merrill Lynch Argentina SA, regulated by Comisión Nacional de Valores; BofAS Japan: BofA Securities Japan Co., Ltd., regulated by the Financial Services Agency; Merrill Lynch (Seoul): Merrill Lynch International, LLC Seoul Branch, regulated by the Financial Supervisory Service; Merrill Lynch (Taiwan): Merrill Lynch Securities (Taiwan) Ltd., regulated by the Securities and Futures Bureau; BofAS India: BofA Securities India Limited, regulated by the Securities and Exchange Board of India (SEBI); Merrill Lynch (Israel): Merrill Lynch Israel Limited, regulated by Israel Securities Authority; Merrill Lynch (DIFC): Merrill Lynch International (DIFC Branch), regulated by the Dubai Financial Services Authority (DFSA); Merrill Lynch (Brazil): Merrill Lynch S.A. Corretora de TÃtulos e Valores Mobiliários, regulated by Comissão de Valores Mobiliários; Merrill Lynch KSA Company: Merrill Lynch Kingdom of Saudi Arabia Company, regulated by the Capital Market Authority.
This information: has been approved for publication and is distributed in the United Kingdom (UK) to professional clients and eligible counterparties (as each is defined in the rules of the FCA and the PRA) by MLI (UK), which is authorized by the PRA and regulated by the FCA and the PRA - details about the extent of our regulation by the FCA and PRA are available from us on request; has been approved for publication and is distributed in the European Economic Area (EEA) by BofASE (France), which is authorized by the ACPR and regulated by the ACPR and the AMF; has been considered and distributed in Japan by BofAS Japan, a registered securities dealer under the Financial Instruments and Exchange Act in Japan, or its permitted affiliates; is issued and distributed in Hong Kong by Merrill Lynch (Hong Kong) which is regulated by HKSFC; is issued and distributed in Taiwan by Merrill Lynch (Taiwan); is issued and distributed in India by BofAS India; and is issued and distributed in Singapore to institutional investors and/or accredited investors (each as defined under the Financial Advisers Regulations) by Merrill Lynch (Singapore) (Company Registration No 198602883D). Merrill Lynch (Singapore) is regulated by MAS. Merrill Lynch Equities (Australia) Limited (ABN 65 006 276 795), AFS License 235132 (MLEA) distributes this information in Australia only to 'Wholesale' clients as defined by s.761G of the Corporations Act 2001. With the exception of Bank of America N.A., Australia Branch, neither MLEA nor any of its affiliates involved in preparing this information is an Authorised Deposit-Taking Institution under the Banking Act 1959 nor regulated by the Australian Prudential Regulation Authority. No approval is required for publication or distribution of this information in Brazil and its local distribution is by Merrill Lynch (Brazil) in accordance with applicable regulations. Merrill Lynch (DIFC) is authorized and regulated by the DFSA. Information prepared and issued by Merrill Lynch (DIFC) is done so in accordance with the requirements of the DFSA conduct of business rules. BofA Europe (Frankfurt) distributes this information in Germany and is regulated by BaFin, the ECB and the CBI. BofA Securities entities, including BofA Europe and BofASE (France), may outsource/delegate the marketing and/or provision of certain research services or aspects of research services to other branches or members of the BofA Securities group. You may be contacted by a different BofA Securities entity acting for and on behalf of your service provider where permitted by applicable law. This does not change your service provider. Please refer to the Electronic Communications Disclaimers for further information.
​This information has been prepared and issued by BofAS and/or one or more of its non-US affiliates. The author(s) of this information may not be licensed to carry on regulated activities in your jurisdiction and, if not licensed, do not hold themselves out as being able to do so. BofAS and/or MLPF&S is the distributor of this information in the US and accepts full responsibility for information distributed to BofAS and/or MLPF&S clients in the US by its non-US affiliates. Any US person receiving this information and wishing to effect any transaction in any security discussed herein should do so through BofAS and/or MLPF&S and not such foreign affiliates. Hong Kong recipients of this information should contact Merrill Lynch (Asia Pacific) Limited in respect of any matters relating to dealing in securities or provision of specific advice on securities or any other matters arising from, or in connection with, this information. Singapore recipients of this information should contact Merrill Lynch (Singapore) Pte Ltd in respect of any matters arising from, or in connection with, this information. For clients that are not accredited investors, expert investors or institutional investors Merrill Lynch (Singapore) Pte Ltd accepts full responsibility for the contents of this information distributed to such clients in Singapore.
General Investment Related Disclosures:
Taiwan Readers: Neither the information nor any opinion expressed herein constitutes an offer or a solicitation of an offer to transact in any securities or other financial instrument. No part of this report may be used or reproduced or quoted in any manner whatsoever in Taiwan by the press or any other person without the express written consent of BofA Securities.
This document provides general information only, and has been prepared for, and is intended for general distribution to, BofA Securities clients. Neither the information nor any opinion expressed constitutes an offer or an invitation to make an offer, to buy or sell any securities or other financial instrument or any derivative related to such securities or instruments (e.g., options, futures, warrants, and contracts for differences). This document is not intended to provide personal investment advice and it does not take into account the specific investment objectives, financial situation and the particular needs of, and is not directed to, any specific person(s). This document and its content do not constitute, and should not be considered to constitute, investment advice for purposes of ERISA, the US tax code, the Investment Advisers Act or otherwise. Investors should seek financial advice regarding the appropriateness of investing in financial instruments and implementing investment strategies discussed or recommended in this document and should understand that statements regarding future prospects may not be realized. Any decision to purchase or subscribe for securities in any offering must be based solely on existing public information on such security or the information in the prospectus or other offering document issued in connection with such offering, and not on this document.
Securities and other financial instruments referred to herein, or recommended, offered or sold by BofA Securities, are not insured by the Federal Deposit Insurance Corporation and are not deposits or other obligations of any insured depository institution (including, Bank of America, N.A.). Investments in general and, derivatives, in particular, involve numerous risks, including, among others, market risk, counterparty default risk and liquidity risk. No security, financial instrument or derivative is suitable for all investors. Digital assets are extremely speculative, volatile and are largely unregulated. In some cases, securities and other financial instruments may be difficult to value or sell and reliable information about the value or risks related to the security or financial instrument may be difficult to obtain. Investors should note that income from such securities and other financial instruments, if any, may fluctuate and that price or value of such securities and instruments may rise or fall and, in some cases, investors may lose their entire principal investment. Past performance is not necessarily a guide to future performance. Levels and basis for taxation may change.
This report may contain a short-term trading idea or recommendation, which highlights a specific near-term catalyst or event impacting the issuer or the market that is anticipated to have a short-term price impact on the equity securities of the issuer. Short-term trading ideas and recommendations are different from and do not affect a stock's fundamental equity rating, which reflects both a longer term total return expectation and attractiveness for investment relative to other stocks within its Coverage Cluster. Short-term trading ideas and recommendations may be more or less positive than a stock's fundamental equity rating.
BofA Securities is aware that the implementation of the ideas expressed in this report may depend upon an investor's ability to "short" securities or other financial instruments and that such action may be limited by regulations prohibiting or restricting "shortselling" in many jurisdictions. Investors are urged to seek advice regarding the applicability of such regulations prior to executing any short idea contained in this report.
Foreign currency rates of exchange may adversely affect the value, price or income of any security or financial instrument mentioned herein. Investors in such securities and instruments, including ADRs, effectively assume currency risk.
BofAS or one of its affiliates is a regular issuer of traded financial instruments linked to securities that may have been recommended in this report. BofAS or one of its affiliates may, at any time, hold a trading position (long or short) in the securities and financial instruments discussed in this report.
BofA Securities, through business units other than BofA Global Research, may have issued and may in the future issue trading ideas or recommendations that are inconsistent with, and reach different conclusions from, the information presented herein. Such ideas or recommendations may reflect different time frames, assumptions, views and analytical methods of the persons who prepared them, and BofA Securities is under no obligation to ensure that such other trading ideas or recommendations are brought to the attention of any recipient of this information.
In the event that the recipient received this information pursuant to a contract between the recipient and BofAS for the provision of research services for a separate fee, and in connection therewith BofAS may be deemed to be acting as an investment adviser, such status relates, if at all, solely to the person with whom BofAS has contracted directly and does not extend beyond the delivery of this report (unless otherwise agreed specifically in writing by BofAS). If such recipient uses the services of BofAS in connection with the sale or purchase of a security referred to herein, BofAS may act as principal for its own account or as agent for another person. BofAS is and continues to act solely as a broker-dealer in connection with the execution of any transactions, including transactions in any securities referred to herein.
ETFs are redeemable only in Creation Unit size through an Authorized Participant and may not be individually redeemed. ETFs also are redeemable on an "in-kind" basis. The mechanism for creation and redemption of ETFs may be disrupted due to market conditions or otherwise.
The public trading price of an ETF may be different from its net asset value, and an ETF could trade at a premium or discount to its net asset value.
Investors in ETFs with international securities assume currency risk.
U.S. exchange-listed, open-end ETFs must be offered under and sold only pursuant to a prospectus. U.S. exchange-listed ETFs may not be marketed or sold in a number of non-U.S. jurisdictions and may not be suitable for all investors. Investors should consider the investment objectives, risks, charges and expenses of the ETF carefully before investing. The prospectus for the ETF contains this and other information about the ETF. Clients may obtain prospectuses for the ETFs mentioned in this report from the ETF distributor or their Merrill Global Wealth Management financial advisor. The prospectuses contain more complete and important information about the ETFs mentioned in this report and should be read carefully before investing.
BofAS or one of its affiliates receives licensing fees in connection with certain Select Sector Indices, Select Sector SPDR Funds, and the use of various marks associated with the foregoing. Such fees are paid from The Select Sector SPDR Trust ("Trust"), in respect of each Select Sector SPDR Fund, based on the average aggregate daily net assets of such Select Sector SPDR Fund (based on net asset value as described in the Trust's prospectus). Such fees also may be made in respect of other ETF providers for the right to create ETFs based on the Select Sector Indices, or different versions thereof.
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For clients in Wealth Management, to the extent that the securities referenced in this report are ETFs or CEFs, investors should note that (1) the views and ratings presented by BofA Global Research personnel may vary from those of other business units of BofA Securities. including the Due Diligence group within the Chief Investment Office of MLPF&S ("CIO Due Diligence"); and (2) the CIO Due Diligence review process is used to determine the availability of an ETF or CEF for purchase through the Wealth Management division of MLPF&S and its affiliates.
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Copyright 2023 Bank of America Corporation. All rights reserved. iQdatabase® is a registered service mark of Bank of America Corporation. This information is prepared for the use of BofA Securities clients and may not be redistributed, retransmitted or disclosed, in whole or in part, or in any form or manner, without the express written consent of BofA Securities. BofA Global Research information is distributed simultaneously to internal and client websites and other portals by BofA Securities and is not publicly-available material. Any unauthorized use or disclosure is prohibited. Receipt and review of this information constitutes your agreement not to redistribute, retransmit, or disclose to others the contents, opinions, conclusion, or information contained herein (including any investment recommendations, estimates or price targets) without first obtaining express permission from an authorized officer of BofA Securities.
Materials prepared by BofA Global Research personnel are based on public information. Facts and views presented in this material have not been reviewed by, and may not reflect information known to, professionals in other business areas of BofA Securities, including investment banking personnel. BofA Securities has established information barriers between BofA Global Research and certain business groups. As a result, BofA Securities does not disclose certain client relationships with, or compensation received from, such issuers. To the extent this material discusses any legal proceeding or issues, it has not been prepared as nor is it intended to express any legal conclusion, opinion or advice. Investors should consult their own legal advisers as to issues of law relating to the subject matter of this material. BofA Global Research personnel's knowledge of legal proceedings in which any BofA Securities entity and/or its directors, officers and employees may be plaintiffs, defendants, co-defendants or co-plaintiffs with or involving issuers mentioned in this material is based on public information. Facts and views presented in this material that relate to any such proceedings have not been reviewed by, discussed with, and may not reflect information known to, professionals in other business areas of BofA Securities in connection with the legal proceedings or matters relevant to such proceedings.
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