On this week’s episode of ETF Prime, host Nate Geraci sat down with Roxanna Islam, head of sector & industry research at VettaFi. Geraci and Islam discussed new ETF filings from BattleShares, Cambria, iShares, Canary, and others. Later, Geraci welcomed Galaxy’s Chris Rhine and State Street’s Matt Bartolini to discuss the firms’ recent collaboration on three active ETFs.
Recent Unique ETF Filings
BattleShares
First up, Geraci and Islam discussed the recent filing for the BattleShares ETFs, which are designed to go long and short on two opposing stocks. Some of these opposing stock pairs include Nvidia versus Intel and Tesla versus Ford.
“It’s a fun idea,” Islam said. “I think these are going to get some attention just because of some of the names behind this. You put Nvidia in almost anything now and people are going to talk about it. They’re going to at least look at it.”
According to Islam, the idea behind these ETFs is that a new industry leader will do well and displace the former leaders.
“It’s interesting because it’s the opposite of thematic investing,” Islam said. “When you’re looking at thematic investments, you have this trend, and then you have the new entrants and the legacy leaders, and you’re diversifying among them. You’re hoping that this trend will just boost the whole industry.”
Islam said the BattleShares ETFs sound very exciting, but noted the ETFs use leverage, derivatives, and are pretty complex products — meaning, they have some risk. “I think it could be a problem with some retail investors who maybe don’t fully understand how these products work, but they’re drawn into these really interesting ideas,” Islam added.
Cambria’s Tax Aware ETF
Next, Geraci asked Islam for her analysis of the Cambria Tax Aware ETF (TAX). The ETF will use a Section 351 exchange. At a high level, this means that individuals who have a portfolio comprising individual stocks that have sizable capital gains can exchange that portfolio for the ETF shares without triggering a taxable event, according to Geraci.
“[TAX] is aimed at individuals in higher tax brackets. I think I read that it made sense for investors with about $500,000 in securities. So it’s about creating that tax efficient investment return and reducing that tax liability,” Islam said. “It’s interesting. You went through the mechanics already, but on a high level, it takes these investors’ assets and it swaps them for shares of the funds, instead of buying them in cash. So when you do this, it’s not a taxable event. There’s not a taxable gain.”
iShares’ Structured Product Entrant
The proposed iShares Large Cap Accelerated ETF is essentially a type of buffer ETF, seeking two times the return of the S&P 500 with the same level of losses, Islam said.
“It is a little bit more cautious than investing directly in something that would give you unlimited upside,” Islam said. “You do hold it for an outcome period for it to work properly like other buffer ETFs. But these are quarterly outcome periods, so they’re not the typical annual outcome periods that you might see.”
“I thought this was a pretty interesting play on the buffered ETF world,” Islam added.
Crypto ETF Filings Jump Ahead of U.S. Presidential Election
In recent months, the ETF industry has seen filings for a Litecoin ETF, XRP ETFs, and Solana ETFs. Geraci questioned whether these are a call option on the November election — basically betting on a Trump administration — or if Islam sees another path for approval.
“I think there’s a lot of things up in the air with these,” Islam said. “I think some investors and issuers are foreseeing a more crypto-friendly environment going forward, so it seems like they’re sort of testing the waters ahead of time, just sort of getting these filings in beforehand.”
Additionally, Islam thinks the industry is still riding the tailwinds of the spot Bitcoin ETF launch.
“That launch was such a strong course for the industry, and the flows are still going pretty strong in those products,” Islam added. “I think that’s inspiring issuers and investors who are interested in this industry to just keep going and keep pushing forward.”
Therefore, there really could be two different theses for these new crypto ETF filings.
“It could be that we see that the crypto environment will become less strict, so we’re just trying to move forward with all these different products,” Islam said. “But it also could be that we don’t really know where the industry is going next, so we’re just sort of throwing spaghetti at the wall and trying to see what sticks and what gets approved.”
Galaxy and State Street on the Firms’ Collaboration
Last month, Galaxy Asset Management and State Street Global Advisors teamed up to launch three actively managed ETFs focused on digital assets and disruptive technologies.
Bartolini said the partnership with Galaxy came about as State Street wanted to partner with a firm that knows the space inside and out, in order to deliver that return stream in an actively managed portfolio.
The firms’ new ETFs include the SPDR Galaxy Digital Asset Ecosystem ETF (DECO ), SPDR Galaxy Hedged Digital Asset Ecosystem ETF (HECO ), SPDR Galaxy Transformative Tech Accelerators ETF (TEKX ).
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