On this week’s episode of ETF Prime, host Nate Geraci is joined by Dave Nadig, CIO and director of research for ETF Trends and ETF Database, to debate their predictions for ETFs in 2022. Geraci is also joined by Jeremy Schwartz, global CIO at WisdomTree, to discuss the company’s entry into digital assets and its newest fund, and the podcast wraps with a discussion with Wade Guenther, partner at Wilshire Phoenix, about the company’s newest ETF as well as its history in trying to bring a bitcoin ETF to market.
Nadig opens by discussing the strategic deal recently announced between O’Shares ETFs and SS&C ALPS Advisors. The deal arose in order to increase ETF distribution to a broader audience, showcasing one of the difficulties for smaller ETF companies. Distribution on a large scale that includes platform access to large banking institutions and long-term investments from financial advisors takes a level of work and knowledge of distribution that many small ETF firms cannot access on their own, Nadig explains.
Moving on to discuss trends, both Geraci and Nadig believe that there will be a big boom of independent ETF issuers coming to market, but they will all have to face the distribution hurdle if they want to eventually grow their businesses larger.
Geraci believes that an ethereum futures ETF will come to market in 2022 and that ESG ETF closures are going to spike this year, while Nadig believes that they’re sound predictions but is skeptical on both.
“Right now, ethereum futures are a lot less liquid than the bitcoin futures, and so I can see some skepticism,” Nadig explains.
Within the ESG space, Nadig argues that there are a lot more ESG funds coming to market this year and that every major financial advisor is having a discussion about the space with clients. Geraci, however, counters that the market is oversaturated.
Geraci also believes that 401(k)s are going to start incorporating ETFs because the mechanism is now in place to allow that, and because increasingly more mutual funds are converting to ETFs. Nadig, however, believes that the draw of ETFs for their tax efficiency is a moot point within 401(k)s, and also that established 401(k) funds simply aren’t going to change their entire models to incorporate ETFs.
Nadig and Geraci also both touched on Vanguard’s patent for an ETF/mutual fund hybrid that expires in 2023 and how it will increasingly become a talking point this year.
Bitcoin, Gold, and Crypto
WisdomTree is an ETF firm that has a long history of trying to integrate crypto into investing, from multiple spot bitcoin filings to partnering to create a crypto index in 2021. WisdomTree was the first ETF issuer to actually hold bitcoin futures within a fund, via its WisdomTree Enhanced Commodity Strategy Fund (GCC ), which is long only and is allocated 100% strategically. The WisdomTree Managed Futures Strategy Fund (WTMF) also holds bitcoin futures now and is a more tactical allocation than GCC.
“We do believe a spot bitcoin ETF is warranted. We didn’t file for 100% futures, we believe in 100% spot,” explains Schwartz. WisdomTree has done the due diligence in visiting where its crypto is custodied, and it hopes over time to be able to work with regulators to make it a comfortable angle.
The WisdomTree Efficient Gold Plus Miners Strategy Fund (GDMN) offers leveraged returns for investors. For every $1 put into the fund, through leveraging, the investor gets $1.80 in exposure, $0.90 of gold futures and $0.90 of gold miners, Schwartz explains.
The program closes with Wade Guenther discussing the wShares Enhanced Gold Trust (WGLD), which was created to bring institutional strategy to retail investors. The fund allocates its exposure to gold through the rules-based index that utilizes algorithms to determine its percentage of physical gold allocation.
“We value inclusion by bringing in these often-reserved institutional investment strategies to all investors, so I think that is really where our white space is going to be,” Guenther explains.
Wilshire Phoenix has been working to try and get a spot bitcoin since 2018 by meeting with individual Commissioners as well as the SEC staff to try and find the language and structure that would work for a spot bitcoin fund. Its findings and structures are used in current spot bitcoin filings by other issuers. Wilshire currently has a bitcoin filing before the SEC.
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