Episode summary
The Rise of ETF Slop | Rational Reminder 392
The Rational Reminder Podcast
· · 1 hr 24 min · Hosts: Benjamin Felix, Dan Bortolotti, Ben Wilson
Summary
The episode argues that ETFs have moved far beyond simple, low-cost index funds into a crowded market of high-fee, behaviorally targeted products the hosts call “ETF slop.” They point to the scale of the shift: more ETFs than individual stocks in the U.S., more active ETFs than index-tracking ETFs, and a record number of new launches in 2025, many with fees that look more like traditional active funds than cheap index products.
The core claim is that many new ETFs are engineered to attract assets rather than improve investor outcomes. The hosts say the ETF wrapper creates a halo effect, so investors often focus on the structure instead of the strategy, fee, and implementation risks. They frame this as a return to the same problems ETFs once helped investors escape, only now packaged in a more marketable form.
They then map out four major categories of slop: thematic ETFs, buffer ETFs, covered call ETFs, and single stock ETFs. Across those categories, the recurring pattern is the same: attractive stories, strong marketing, high costs, and payoff structures that often look good on paper but disappoint in practice for long-term investors.
Key takeaways
- The hosts say 2025 saw more than 1,000 new U.S. ETF launches, with average launch fees around 0.7% and 166 funds above 1%.
- The hosts argue that ETF structure gets too much credit, because investors often mistake “ETF” for “good product” even when the strategy is expensive or speculative.
- On thematic ETFs, the hosts cite research showing specialized funds underperform by about 6% on average in the five years after launch.
- On buffer ETFs, the hosts say the payoff is clever but usually inferior to simpler stock-and-cash mixes once fees and implementation costs are included.
- On covered call ETFs, the hosts argue that high distribution yields come from giving up upside, so total returns should be expected to lag the underlying stocks.
- On single stock ETFs, the hosts say leverage and covered calls combine the risks of individual stocks with the drawbacks of engineered payoff products.
Notable quotes
“the rise of ETF slop. So, we're going to talk about that. Uh it's I I I think it's actually a a real problem for investors”
“they've been engineered to sell products to to attract assets rather than improve outcomes for investors”
“For the first time in US market history, there are more ETFs than there are individual stocks”
“There are more actively managed ETFs than index tracking in the US”
“a lot of the ETFs being launched today have really been engineered to attract assets”
How the episode opens
This is the Rational Reminder podcast, a weekly reality check on sensible investing and financial decision-making from three Canadians. We're hosted by me, Benjamin Felix, chief investment officer, Dan Bordalotti, portfolio manager, and Ben Wilson, head of M&A and portfolio manager at PWL Capital.
Happy New Year everyone. — Yes, good to be back. here. It's episode 392. — 392. Coming up on 400 here. Can't say that I uh ever thought we would get there when we started the podcast. — Yeah. — But — Yeah, that's uh it's what, eight years.
It's around there. Yeah. — Yeah. — Yeah. Been going — A long journey
Every week. Uh all right. So, we have a topic today that uh I've been thinking about for a while and uh realized that it needed a name.
I I don't know if I'm the first person to call it this. I'm I'm sure other people have written about it or something. Um but what I'm calling it is the rise of ETF slop.
So, we're going to talk about that. Uh it's I I I think it's actually a a real problem for investors. But uh anyway, so let's let's get into it.
Uh ETFs are no longer synonymous with sensible investing. Like Dan, when you started your blog, ETFs were like, you know, a big a big part of it. It's why anybody could go and build an index fund portfolio.
And back then, most, but not all, index ETFs were, you know, lowcost index funds. You could kind of throw stick your hand into a bag of random ETFs and you're going to pull out probably something pretty good. Uh, but more recently, the fund management industry is launching literally hundreds of new actively managed ETFs every year.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- etf slop
- thematic etfs
- buffer etfs
- covered call etfs
- behavioral investing products
Watch the episode
Watch “The Rise of ETF Slop | Rational Reminder 392” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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The Rational Reminder Podcast, this episode and its artwork belong to Benjamin Felix, Cameron Passmore, and Dan Bortolotti. Octagon is not affiliated with the show; this page is an independent summary.
