ETF Prime: Lara Crigger discusses an ETF milestone, ARK’s future and reverse blockchain exposure
In the latest episode of ETF Prime, VettaFi’s Editor-in-Chief Lara Crigger and Nate Geraci discuss an ETF milestone, what’s next for ARK Invest, the first inverse blockchain ETF, and an industry hit. Later in the episode, Michael Green, portfolio manager and chief strategist at Simplify, provided insight into Simplify Macro Strategy ETF (NYSE Arca: FIG) and gave his perspective on the current market environment.
With 3,000 ETFs now actively trading, Crigger noted that it’s “wild to see how quickly the ETF industry has grown, especially in the last two years.” She explained that part of this “Cambrian explosion of ETFs” goes back to the SEC adopting the ETF rule in late 2019, making it easier and cheaper for anyone to enter the ETF market.
“And when you make it easier, and you make it cheaper, to launch ETFs, more people are going to launch ETFs,” Crigger said.
The house that three built
With Brett Winton being named Chief Futurist at ARK Invest, many are speculating whether this means Winton is being groomed to take over the reins if and when ARK founder and chief selector Cathie Wood decides to step down. Crigger claimed that, despite Wood’s “devoted fanbase” and critics, ARK “stands on its own”.
“I don’t think Cathie Wood is as much of a household name as we … would like to think. I think ARK stands on its own,” she said, before adding that while Wood’s personality and comments may have influenced the flow into and out of the ARK suite ten years ago, “you’d be hard-pressed to make that argument now.”
Crigger also pointed out that if you consider “the huge research libraries that the ARK team have available, for free, on their websites and newsletters that they produce … you will see that ARK is not just The Cathie Wood show. “
“It’s a team of deeply knowledgeable and well-sourced experts who often spot trends before they become market-changing events,” Crigger said.
IBIT, BLOK and Future of Long Blockchain ETFs
When we discuss the launch of the first inverse blockchain ETF, is Defiance Daily Short Digitalizing the Economy ETF (IBIT)Geraci noted that the fund was launched at a time when the entire cryptocurrency segment “has been wiped out” (the largest blockchain ETF on the market, Amplify Transformational Data Sharing ETF (BLOK), is down almost 50% this year). And while Crgger said IBIT is an interestingly structured fund, she agreed that “it can just enter a market at the wrong time.”
IBIT offers daily inverse exposure to BLOK by buying swaps and short-selling shares of the actively managed BLOK. So, IBIT does not hold the underlying companies in BLOK, and it does not hold the shares of BLOK either – it goes to the derivatives market to get the inverse exposure.
Crigger warned that leveraged and inverse fund exposures are reset daily, meaning their returns can often differ widely from the vanilla version.
“So, just be careful when you own and don’t forget that you own it,” she said. “This is not a set-and-forget instrument.”
As for the long blockchain ETFs, Crigger notes that “the crypto winter has not been kind to blockchain and bitcoin” and expects “eventually there will be a bloodbath in the ETF space.”
“Honestly, I thought some of these would have closed by now,” she said of some of these long blockchain ETFs.
The secret behind JEPI’s success
Crigger rounded off the discussion by sharing another success story JPMorgan Equity Premium Income ETF (JEPI), which “jumped over literally hundreds of other tickers in terms of how much research it saw from investors out there,” from 200th most popular fund to 4th within a few weeks. So far this year, the fund has brought in over $8 billion in new net assets.
And the secret behind the fund’s success? “JEPI’s dividend is just obscenely good right now.”
Investors are looking for viable income options, and with the average high-yield ETF, chances are you’ll get a return of “7%, 8% if you’re lucky.” JEPI gives a return of almost 12%.
“And when it started to become super popular on the research side, JEPI gave a monthly return of 14%,” Crigger said. “So, that’s pretty juicy.”
Listen to the full episode of ETF Prime with Lara Crigger:
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