ETF Prime: Chang Discusses Recent ETF Launches

One of the most talked about recent ETF launches, the SPDR SSGA Apollo IG Public & Private Credit ETF (PRIV ) made a splash when it launched last month. PRIV launched prior to having all regulatory concerns ironed out, which is unusual but not unprecedented, Chang explained. The industry saw something similar with single-stock and leveraged ETFs. 

“I suspect this was largely to make sure the SEC’s bases were covered with an emphasis on transparency to the investor, but it does seem that the issues have been resolved for now,” Chang said. 

Now it will be important to closely monitor the liquidity and demand going forward. 

“At the end of the day, it’s primarily an investment grade bond fund,” Chang said. “There’s a lot of leeway with that promise of 10% to 35% private credit exposure, but they can easily achieve that by opting for more liquid and, in some cases, even rated structured products.” 

Looking under the hood, only about 5% of PRIV is in private credit, according to Chang. The major holdings are all very liquid, and a lot of them are government bonds. 

“I suspect they’re going to take their time carefully testing the waters of these private credit assets before tapping into anything remotely controversial,” Chang said. “Most of the holdings are still parked in fairly liquid debt. Diversified, but primarily in very liquid government securities at the moment.”

Chang said while State Street has top-tier credibility, partnering with Apollo to launch PRIV added a new level of credibility. 

Next up for discussion is the VistaShares Target 15 Berkshire Select Income ETF (OMAH ), which holds the top 20 public equity holdings in Berkshire with an active options overlay to generate income. OMAH launched on March 5.

“Now you might be saying, ‘Well, why not just buy Berkshire stock?’ But this doesn’t just buy Berkshire holdings. It borrows its value-oriented philosophy,” Chang said. “It aims to generate current income through dividends, options and capital gains. So there is some added leeway there. It also pays out a monthly distribution, so in many ways, it acts like an income fund.”

Chang said she thinks OMAH may appeal to two types of investors: those who want current income on a monthly basis, and then those who believe that current income can enhance total returns over time.

Quantify Funds launched the STKd 100% MSTR & 100% COIN ETF (APED ) on March 5. For every $1 invested, this ETF seeks to offer $1 of exposure to micro strategy and $1 of exposure to Coinbase, per Geraci.

“Return stacking is a trend we’ve seen gain traction as we get more folks pushing these alternative strategies,” Chang said. “They give you double exposure, kind of like a two-for-one deal.”

These ETFs are geared toward investors seeking concentrated exposure to some of those highest profile stocks, according to Chang. Essentially, they’re leveraged pair trades that tend to be very high speculative areas like crypto ot AI.

“The idea is to deploy less cash to assume the same risk-return profile as if you spent all of your cash on both bets,” Chang said.

APED may be a good fit for active day traders who really want aggressive exposure, and they can stack that exposure through underlying stocks, features, or options, according to Chang.

Finally, to conclude coverage of recent ETF launches, Geraci and Chang discussed the Roundhill Weekly T-Bill ETF (WEEK ). The fund came to market on March 6. WEEK offers exposure to T-Bills maturity of zero to three months, but they’re staggered in a way that provides weekly distributions. 

“Roundhill has been big on these weekly payment strategies,” Chang said. “They’ve been at the forefront of this kind of thing. Effectively, you’re generating a coupon on a treasury bill and transforming T-Bills into a coupon paying instrument. So your principal stays the same, but you collect the interest rate.”

This fund could be a good fit for a retiree who wants to collect price appreciation in the form of weekly distributions without digging into their core investment, according to Chang. 

“Usually, if you buy a T-Bill ETF, you don’t collect the coupons. Your principal will keep going up because you have to keep reinvesting the money. But in this case, you don’t have to keep reinvesting. You just get to collect the distribution,” Chang explained. 

Later, Precidian’s Stuart Thomas joined Geraci to discuss the firm’s upcoming product launch. Precidian is behind the first suite of currency-backed ETFs called CurrencyShares, which is now run by Invesco.

The firm seeks to offer solutions to address the currency exposure inherent in ADR investing, which is misunderstood by many investors.

For more ETF Prime podcast episodes, visit our ETF Prime Channel.