The Securities and Exchange Commission, by law, gets between 60 and 75 days to review proposed new funds before they can be offered for sale to the public. Each month we survey actively managed funds and ETFs in the pipeline. This month brings 28 new products in the pipeline, most of which will launch in August or September. The recent record, though, is that many authorized products are being withheld from the market; that is, there are funds that advisers could launch but haven’t chosen to. It might be a sign of market anxiety.
Bitcoin mania is in full bloom.
The primary advantage of Bitcoin and its crypto-competitors is simple: it’s a way to hide money from governments. That’s a very good thing if you live in a nation where the government might impose currency controls (so that you can’t move your money out of their control) or where it has a history of seizing assets. Other potential advantages (it offers a stable store of value or can be used to buy stuff) are either unproven or available in less volatile forms.
The primary disadvantages of Bitcoin and its crypto-competitors are simple:
They are wildly volatile. Bitcoin, for example, has had five double-digit corrections in about six months. As we write, bitcoin booked a 42% decline in value over just six weeks, from $65,000 to $38,000.
Their value can be savaged by a single tweet from a single autistic savant. Irritate Elon, lose 20% (When Elon Musk tweets, Crypto prices move, Vox, 5/18/2021).
They required unconscionable amounts of energy to produce. There’s general agreement that bitcoin, both in mining and in transactions, consumes as much electricity as some entire nations (Ireland and Brazil are cited) or millions of American homes. The estimates vary substantially because different mining rigs differ in efficiency. Still:
Cambridge’s Centre for Alternative Finances estimates that bitcoin’s annualized electricity consumption hovers just above 115 terawatt-hours (TWh) while Digiconomist’s closely tracked index puts it closer to 80 TWh.
A single transaction of bitcoin has the same carbon footprint as 680,000 Visa transactions or 51,210 hours of watching YouTube, according to the site (Electricity needed to mine bitcoin is more than used by ‘entire countries’, The Guardian, 2/27/2021).
They are in competition with every other cryptocurrency and fiat currency, which will inevitably drive the price of most cryptocurrencies to zero. A currency is useful only if someone will accept it, but no vendor will be willing to simultaneously price their goods or services in dozens of highly volatile currencies. How many “highly volatile currencies”? The Investopedia estimates that there are 4,000 cryptocurrencies in circulation.
Naturally, the investment industry is swooning over the opportunity. Despite the lack of SEC approval for such investments, firms are quickly queuing up for the distinction of being the first to relieve you of unneeded and unwanted cash in your investment account. This month’s entrants include:
Bitcoin Strategy ProFund
Bitcoin Strategy ProFund will seek capital appreciation. The plan is to actively manage exposure to Bitcoin futures contracts. No hint about the basis for the “active management.” No word yet on who will manage the fund. Its opening expense ratio has not been disclosed, and the minimum initial investment will vary between $5,000 (for accounts that list a financial professional) and $15,000 for self-directed accounts.
Cboe Vest Bitcoin Target Volatility Strategy Fund
Cboe Vest Bitcoin Target Volatility Strategy Fund will seek total return. The plan is to construct “a dynamic portfolio with the aim of both managing the volatility of the Fund and limiting losses due to severe sustained declines in the market performance of Bitcoin, which it will do through the use of exchange-traded derivative contracts.” The translation is that the portfolio will have more or less exposure to Bitcoin and to stable alternatives such as Treasuries, based on Bitcoin’s volatility. More volatility = less exposure. The fund will be managed by Karan Sood and Howard Rubin. Its opening expense ratio has not been disclosed, and the minimum initial investment will be $1,000.
First Trust Skybridge Bitcoin Strategy Fund
First Trust Skybridge Bitcoin Strategy Fund will seek capital appreciation. The plan is to have 100% nominal exposure to Bitcoin primarily through Bitcoin futures contracts, with the remainder of the portfolio invested in bonds. The fund will be managed by Anthony Scaramucci and Brett Messing. Its opening expense ratio has not been disclosed, and the minimum initial investment will be $2,500.
NYDIG Bitcoin Strategy Fund II
NYDIG Bitcoin Strategy Fund II will seek capital appreciation. The plan is to use Bitcoin futures contracts to maintain 100-125% exposure to Bitcoin, with the remainder of the portfolio invested in bonds. The fund will be managed by [ ], [ ]and [ ] (the “Portfolio Managers”). Its opening expense ratio has not been disclosed, and the minimum initial investment will be $2,500.
We’ll be carefully watching, on your behalf, for crypto-art, non-fungible token, and collectibles funds in the months ahead. You know they’re coming.
As to the rest of the registrants:
- Most will debut in August or September
- For the first time in a long time, almost every fund has at least one female team member. That said, it’s hard to guess the sex of [ ] or [ ], who have been introduced as the managers of several new funds.
- ETF versions of Cambiar Opportunity and FMI Large Cap, both fine funds, are coming online.
- ESG and, explicitly or implicitly, “disruptive” investments remain greatly in vogue.
Aberdeen Global Equity Impact Fund
Aberdeen Global Equity Impact Fund seeks long-term growth of capital. The plan is to invest in companies that aim to create positive, measurable environmental and/or social impacts. The fund will be managed by Dominic Byrne and Sarah Norris. The initial expense ratio is unknown. The minimum initial purchase is $1000.
Aberdeen International Sustainable Leaders Fund
Aberdeen International Sustainable Leaders Fund seeks long-term growth of capital. The plan is to invest in equity securities of foreign companies that the Adviser deems to have sound and improving prospects and which demonstrate that they are current or emerging sustainable leaders through their management of ESG risks and opportunities. The fund will be managed by Joanna McIntyre, Dominic Byrne, and Ella-Kara Brown. The initial expense ratio is unknown. The minimum initial purchase is $1000.
AltShares Event-Driven ETF
AltShares Event-Driven ETF seeks to achieve capital appreciation over a full market cycle with lower volatility than the broad equity market. They’ll employ a long/short event-driven strategy, which seeks to profit by investing, long and/or short, in the equity and debt securities of companies whose prices are or will be impacted by a publicly announced or anticipated corporate event. The ETF will inherit the assets, and possibly the record (?), of the Water Island Long/Short Fund. It will be managed by Eric Becker and John Orrico. The initial expense ratio is 1.30%.
AAM Bahl & Gaynor Small/Mid Cap Income Growth ETF
AAM Bahl & Gaynor Small/Mid Cap Income Growth ETF, an actively-managed ETF, seeks high current dividend income. The plan is to factor in a company’s historical earnings and dividends growth, as well as its balance sheet and cash flow generation, competitive position, and prospects for future cash flow and dividend growth. The fund will be managed by Scott D. Rodes and Robert S. Groenke . Its opening expense ratio is unknown.
BlackRock Sustainable High Yield Bond Fund
BlackRock Sustainable High Yield Bond Fund will seek – okay, I’m going to quote at painful length here – “to maximize total return, consistent with income generation and prudent investment management, and to seek to maintain certain environmental, governance and social characteristics, climate risk exposure and climate opportunities relative to the Fund’s benchmark.” So, the plan is to do all that stuff with non-investment grade bonds with maturities of ten years or less. The fund will be managed by David Delbos, Mitchell Garfin, and Ashley Schulten. Its minimum initial investment will be $1,000.
BNY Mellon Responsible Horizons Corporate Bond ETF
BNY Mellon Responsible Horizons Corporate Bond ETF, an actively-managed ETF, seeks a total return consisting of capital appreciation and income. The plan is to buy investment-grade corporate bonds issued by companies that demonstrate attractive investment attributes and attractive business practices based on an ESG evaluation. There’s no duration target. The fund will be managed by Erin Spalsbury and Scott Ruesterholz. Its opening expense ratio has not been disclosed.
BNY Mellon Ultra Short Income ETF
BNY Mellon Ultra Short Income ETF, an actively-managed ETF, seeks high current income consistent with the maintenance of liquidity and low volatility of principal. The plan is to buy investment grade, U.S. dollar-denominated fixed, variable, and floating rate debt or cash equivalents. The typical duration is one year or less. The fund will be managed by [_____] and [______]. (sigh) Its opening expense ratio is unknown.
Cambiar Large Cap ETF
Cambiar Large Cap ETF, an actively managed ETF, seeks total return and capital preservation. The plan is to look among large cap stocks for the usual suspects: quality, value, a catalyst, and the prospect of seeing some gain within the next 1-2 years. It sounds a lot like an ETF version of the firm’s four-star Opportunity Fund (CAMOX). The fund will be managed by a team led by Brian Barish. Its opening expense ratio has not been disclosed. The same prospectus lists small cap and SMID cap versions of the same strategy with the same team.
Discipline Fund ETF
Discipline Fund ETF seeks long-term growth of capital. It’s an ETF-of-ETFs whose neutral position is 50% equity/50% income, though the managers can push either of those allocations from 30-70%. The fund is managed by Cullen Roche, the Pragmatic Capitalist guy. The opening expense ratio is 0.39%.
First Trust Limited Duration Investment Grade Corporate ETF
First Trust Limited Duration Investment Grade Corporate ETF, an actively-managed ETF, seeks current income. The plan is to buy investment-grade corporate debt, with the usual hoo-hah about rigorous top-down and bottom-up analysis. The portfolio duration will linger within one year of its benchmark index. The fund will be managed by a First Trust team. Its opening expense ratio has not been disclosed.
FMI Large Cap ETF
FMI Large Cap ETF, an actively-managed ETF, seeks long-term capital appreciation. The plan is to invest in US large caps and international firms that trade as ADRs. The managers look for a strong, defendable market niche, A high degree of relative recurring revenue, modestly priced products or services, attractive return-on-investment economics, and above-average growth or improving profitability prospects. The fund will be managed by a team of a dozen FMI managers. The mutual fund version of the strategy has a “Gold” rating from Morningstar and has earned a “Great Owl” designation from MFO. Its opening expense ratio is unknown.
Formidable Fortress ETF
Formidable Fortress ETF, an actively managed ETF, seeks long-term capital appreciation. The plan is to invest in mid- to large-cap stocks that have at least one of relatively low debt, relatively low beta, rising dividends, or relatively high quality. And then the managers get to add leverage, up or down. The fund will be managed by a team headed by Michael Venuto. Its opening expense ratio is 0.89%.
Harbor Scientific Alpha High-Yield ETF
Harbor Scientific Alpha High-Yield ETF, an actively managed ETF, seeks total return. The plan is to buy high-yield bonds based on the same multiple sources / economic intuition / rigorous backtesting that’s highlighted in its Income sibling. There is no target duration in the portfolio. .” The fund will be managed by a team from BlueCove Limited. The BlueCove folks are all BlackRock alumni. Its opening expense ratio is 0.48%.
Harbor Scientific Alpha Income ETF
Harbor Scientific Alpha Income ETF, an actively managed ETF, seeks total return. The plan is to buy bonds and fixed-income derivatives based on “proprietary insights based on economic intuition to form an investment hypothesis. This hypothesis is backtested to assess its validity over time, in particular with respect to returns in relation to the wider market. Insights are tested, scaled, and weighted based on their deemed strength in predicting returns, as determined by the Subadviser. The Subadviser expects that the majority of the Fund’s total returns will be generated from coupon income and from asset allocation decisions.” The fund will be managed by a team from BlueCove Limited. The BlueCove folks are all BlackRock alumni. Its opening expense ratio is 0.50%.
Hartford Schroders ESG US Equity ETF
Hartford Schroders ESG US Equity ETF, an actively managed ETF, seeks long-term capital appreciation. The plan is to achieve a better ESG profile compared to its benchmark while still factoring value, profitability, momentum, and low volatility into their investing decisions. The fund will be managed by Ashley Lester and Ben Corris. Its opening expense ratio has not been disclosed.
Main International ETF
Main International ETF, an actively managed ETF, seeks above-benchmark returns with below-benchmark risk. The plan is to buy other ETFs in order to gain exposure to sectors or countries on the cusp of transformative change. The fund will be managed by Kim D. Arthur, James W. Concidine, and J. Richard Fredericks. Its opening expense ratio is unknown.
Metropolitan West ESG Securitized Fund
Metropolitan West ESG Securitized Fund will seek to maximize current income and achieve above-average long-term total return. The plan is to buy asset-backed bonds which pass one or more of its positive-screening ESG criteria to support sustainable initiatives. The fund will be managed by Mitch Flack, Stephen M. Kane, Elizabeth (Liza) Crawford, and Harrison Choi. Its opening expense ratio is unknown, and the minimum initial investment will be $5,000, reduced to $1,000 for retirement accounts.
Metropolitan West Opportunistic High Income Credit Fund
Metropolitan West Opportunistic High Income Credit Fund will seek maximum total returns through a combination of current income and capital appreciation. The plan is to pursue global investment opportunities related to income-generating credit securities, including distressed and defaulted securities. The fund will be managed by Tad Rivelle (the famous guy), Steven J. Purdy, Harrison Choi, and Brian Gelfand. Its opening expense ratio is unknown, and the minimum initial investment will be $5,000, reduced to $1,000 for retirement accounts.
PIMCO Municipal Income Opportunities Active ETF
PIMCO Municipal Income Opportunities Active Exchange-Traded Fund, an actively-managed ETF, seeks current income exempt from federal income tax and long-term capital appreciation. The plan is to buy muni bonds with a portfolio duration within two years of its benchmark. Up to 30% of the portfolio might be invested in high yield munis. The fund will be managed by David Hammer, Rachel Betton, and Kyle Christine. Its opening expense ratio has not been disclosed.
Spear Alpha ETF
Spear Alpha ETF, an actively managed ETF, seeks long-term capital growth. The plan is to look for companies that are poised to benefit from breakthrough innovation in industrial technology, then decide whether their stock is worth buying. The breakthrough areas are the predictable ones. The fund will be managed by Ivana Delevska, who has about 14 years of experience as an equity analyst and research director. Its opening expense ratio is unknown.
The Future Fund Active ETF
The Future Fund Active ETF, an actively managed ETF, seeks capital appreciation. The plan is to invest in US-listed mid- and large-cap stocks of the firms best positioned to take advantage of emerging technological or social developments. The fund will be managed by Gary Black and David Kalis. Mr. Black has had a long and headline-making career, including stints at Aegon, Calamos, and Janus. Its opening expense ratio is 1.00%.
Virtus Duff & Phelps Clean Energy ETF
Virtus Duff & Phelps Clean Energy ETF, an actively managed ETF, seeks capital appreciation. The plan is to create a global equity portfolio of clean energy firms. The fund will be managed by Benjamin Bielawski and Eric Fogarty. Its opening expense ratio is unknown.
Virtus KAR Small-Mid Cap Value Fund
Virtus KAR Small-Mid Cap Value Fund will seek long-term capital appreciation. The plan is to invest in 25-35 small and mid-market capitalization companies which are undervalued relative to their future growth potential. The fund will be managed by Julie Kutasov and Craig Stone. Its opening expense ratio is unknown, and the minimum initial investment will be $2,500.
Wonderfund ZEROFEE Systematic All Weather Fund
Wonderfund ZEROFEE Systematic All Weather Fund will seek positive absolute returns. The plan is to invest in U.S. and international, including emerging markets, commodity, and financial futures, and foreign currency markets. The Fund seeks investment opportunities across many market sectors, including currencies, interest rates, bonds, stock indices, metals, energy, and agricultural sectors. The Fund will typically have exposure to long and short positions across all four major asset classes (commodities, currencies, fixed income, and equities). The fund will be managed by Dr. Gerhard Entzmann. Its opening expense ratio is zero, and the minimum initial investment will be $10,000. It’s almost a service to investors that the minimum subsequent purchase, $5000, is so high.
