Maital Legum, head of ETF solutions at Teucrium, said not every financial asset should be packaged as an exchange-traded fund [1].

This caution comes as U.S. stocks reach record highs, creating a market environment where financial providers are increasingly incentivized to wrap diverse assets into the ETF structure to attract investors [1].

Speaking on Bloomberg’s ETF IQ program on Thursday, Legum said the ongoing development of exchange-traded products [1]. The conversation, featuring hosts Scarlet Fu and Eric Balchunas, focused on the balance between accessibility and the appropriateness of the fund vehicle for specific asset classes [1].

Legum said the current momentum in the U.S. equity markets might lead to a trend of over-packaging [1]. While ETFs offer liquidity and ease of access, the structure is not universally suited for every type of investment strategy or underlying asset [1].

The discussion highlighted a tension in the current financial landscape, the drive for product innovation versus the risk of creating inefficient or inappropriate investment vehicles [1]. Legum said the industry must distinguish between assets that benefit from the ETF wrapper and those that do not [1].

As the market continues to hit new peaks, the pressure to create new products often increases [1]. Legum said maintaining a disciplined approach to product design is essential to protect the long-term integrity of the exchange-traded market [1].

“Not everything should be packaged as an ETF.”

The push to 'ETF-ize' every asset class reflects a broader trend of retailization in finance, where complex instruments are simplified for easier trading. However, if assets with low liquidity or high volatility are forced into the ETF structure, it may create a mismatch between the product's trading mechanism and the underlying asset's behavior, potentially increasing systemic risk during market corrections.