The Rise of ETF Slop - The Rational Reminder Podcast Recap

Podcast: The Rational Reminder Podcast

Published: 2026-01-15

Duration: 1 hr 15 min

Summary

The episode highlights the increasing prevalence of actively managed ETFs that do not necessarily improve investor outcomes, a phenomenon described as 'ETF slop.' The hosts discuss how this trend undermines the original benefits of ETFs, such as low fees and sensible investing practices.

What Happened

In this episode, hosts Benjamin Felix, Dan Bordolotti, and Ben Wilson dive into the growing concern of what they term 'ETF slop.' As the number of ETFs continues to expand at an unprecedented rate, the hosts emphasize that many of these new products are actively managed and often designed more for marketing purposes than for enhancing investor outcomes. They point out that in the U.S., there are now more ETFs than individual stocks, a notable shift that reflects a market where financial product innovation is increasingly geared towards sales rather than genuine value for investors.

The discussion highlights that the traditional perception of ETFs as synonymous with low-cost index funds is rapidly changing. With the rise of actively managed ETFs, many investors might not realize that they are now faced with higher fees and complex strategies that do little to benefit them. The average management fee for newly launched U.S. ETFs in 2025 was 0.7%, and many funds exceeded 1%, bringing back the high-cost structure that ETFs initially sought to eliminate. The hosts emphasize that while active management isn't inherently bad, the vast majority of new actively managed ETFs are unlikely to serve the best interests of investors, leading to what they call the 'darkness' of high fees and poor performance.

Key Insights

Key Questions Answered

What is ETF slop?

The term 'ETF slop' refers to the phenomenon where many recently launched ETFs are engineered more for marketing purposes than for improving outcomes for investors. The hosts argue that this trend is problematic, as it reflects a shift away from the low-cost, sensible investing principles that originally made ETFs popular. In essence, ETF slop highlights the growing concern that the influx of new ETFs may not serve the best interests of investors.

How has the number of ETFs changed in recent years?

The podcast reveals that the number of ETFs has dramatically increased, with the U.S. market seeing more ETFs than individual stocks for the first time in history. Specifically, in 2025 alone, over 1,100 new ETFs were launched in the U.S., setting a record. In Canada, more than 300 new ETFs were introduced in the same year, showcasing a similar trend despite the smaller market size.

Are all actively managed ETFs bad?

While the hosts acknowledge that active management is not inherently bad, they caution that many of the newly launched actively managed ETFs employ complex strategies that are unlikely to benefit most investors. They stress that investors should be discerning, as many of these funds may charge high fees without delivering improved performance compared to traditional index funds.

What impact do high fees have on ETFs?

The episode discusses the concerning trend of rising fees within the ETF market, particularly the newly launched funds. The average management fee for U.S. ETFs launched in 2025 was 0.7%, which is comparable to typical actively managed mutual funds. This shift towards higher fees brings back the disadvantages that ETFs originally aimed to eliminate, such as high costs and poor performance.

Why do investors still trust ETFs over mutual funds?

The hosts explore the idea that ETFs have a 'halo effect,' where investors perceive them as superior to mutual funds. This perception leads many to overlook the potential downsides of new actively managed ETFs, which may share the same issues as traditional mutual funds. The distinction between the two is crucial, as many investors still associate ETFs with low fees and sensible investing, despite the emergence of high-fee active strategies.