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What just happened?
Is it the groundswell of vaccinations, the recent spring holidays, or the first breath of warm air that makes it feel like “we’re born again, there’s new grass on the field,” as John Fogerty said?
We’ve all got cabin fever, and not just because it’s been a long winter. The months since COVID-19 was first declared a global pandemic until now have been an eternity.
In ETF land, it’s been a long wait for a bitcoin fund — but one might be on the horizon. The same may not be true for rising rates: retirees and other income-seekers may have to wait longer. This week, we offer some coverage of both issues — how some industry heavy-hitters are thinking about cryptocurrencies, and how to work around the income issue.
Universal/Courtesy Everett Collection
May the coming week hold nothing but sunshine and home runs for you, and thanks for reading.
Put us in, coach, we’re ready to play
Bitcoin spring fever is in the air, and like long-suffering (fill in the blank) fans, the ETF industry is united behind one simple vow: this is our year.
(Here’s some earlier Wrap coverage on why industry participants think a more open-minded SEC will finally clear the way for a bitcoin
BTCUSD,
ETF sometime in 2021, and, for your fantasy baseball brackets, some recent financial-Twitter, eh, armchair quarterbacking around the issue.
On Wednesday, MarketWatch and Barron’s convened a group of crypto industry participants to discuss the landscape for the asset class (part two will be held April 14). One session focused on “the illusive bitcoin ETF,” and featured Jan van Eck of VanEck and Som Seif of Purpose Investments.
Not surprisingly, both men had strong views on the upsides a bitcoin ETF would bring for U.S. investors.
ETFs have proven to be the most efficient way for investors to get exposure to different assets, Seif noted — particularly those that have historically been less straightforward to access, like gold.
Van Eck agreed. ETFs bring price competition to markets, just as they did for gold, he said, as well as transparency, tax reporting and more efficiency in trading. Both panelists said they think bitcoin’s volatility will decline as access increases.
Noting the rash of recent applications to launch funds, both acknowledged that it’s not clear how many different ETPs the market could absorb.
Even if the SEC approves several different applications, investors will pick winners and losers. Fees grab a lot of attention in the ETF space, Seif said, but “strategy is more important” — and strategy becomes important in a fund landscape that involves putting a digital asset into a “traditional finance” wrapper.
Van Eck agreed, calling bitcoin “revolutionary” for finance, in part because it involves instantaneous settlement and 24-7 trading. “The execution and mechanics is inside baseball but it’s important to get it right,” he said.
The Coinbase public offering will also help mature and legitimize crypto into the financial-services world, both men agreed.
Exchange-traded sundries
Vanguard has launched its first actively managed bond ETF. The Vanguard Ultra-Short Bond ETF
VUSB,
“offers a low-cost, diversified option for investors seeking income and limited price volatility,” the company said in a statement. “An ultra-short strategy bridges the gap between money market funds offering a stable share price and short-term bond funds, which are meant for longer investment time horizons.” The fund has a 0.10% expense ratio, versus the average of 0.22% for the category.
Early in April, research heavyweight Morningstar grabbed attention for its critical views on ETF manager Cathie Wood and her flagship fund, the ARK Innovation ETF. Shortly after, MarketWatch published some thoughts from a research competitor, CFRA, that might be called a “glass-half-full” look at how ETF shops and their funds are run.
Speaking of CFRA, Wrap readers may remember an unofficial bet between its research head, Todd Rosenbluth, and ETF pioneer Dave Nadig over the best ways to play a big infrastructure bill with ETFs. Rosenbluth’s pick, the Global X US Infrastructure Development ETF
PAVE,
is now up 18.4% in the year to date, while Nadig’s, the FlexShares STOXX Global Broad Infrastructure Index Fund
NFRA,
has turned out a 5.8% return.
Read: Biden rolls out $2.3 trillion infrastructure plan: ‘It’s bold, yes, and we can get it done’
Read: Here are the ETFs to help you invest in the Biden infrastructure plan
Is there an ETF for that?
Dividends are back.
Companies collectively increased their payouts by $20.3 billion, the largest quarterly increase since Q1 2012, according to data from S&P Dow Jones Indices.
For investors who depend on income, that’s good news. For one thing, it comes as bond yields seem to be taking a breather after lurching higher throughout the first quarter. To be sure, dividends aren’t paying all that much, but it’s still more than bonds: the average was 2.48% in Q1, according to the S&P Dow Jones Indices report, compared to a recent 1.64% yield on the 10-year U.S. Treasury note
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Wrap has previously profiled dividend “aristocrat” ETFs — those that include companies that don’t just pay a dividend, but increase it consistently. These aren’t fast-growth stocks, for obvious reasons: they’ve been raising their quarterly payouts longer than some high-tech CEOs have been alive.
The ProShares S&P 500 Dividend Aristocrats ETF
NOBL,
may still be the king, but there are some other ways to play the theme. The ProShares S&P MidCap 400 Dividend Aristocrats ETF
REGL,
targets mid-cap companies like Williams Sonoma Inc.
WSM,
and UMB Financial Corp
UMBF,
It offers a distribution yield of 3.28%, according to the fund’s web site, versus 2.69% for NOBL.
The Schwab U.S. Dividend Equity ETF
SCHD,
offers a distribution yield of 3.01%. It has a very different composition than NOBL: heavier weighting of financials, less allocated to materials, for example.
Visual of the Week
Source: Morgan Stanley
Weekly rap
| Top 5 gainers of the past week | |
|
ETFMG Prime Junior Silver Miners ETF SILJ, |
11.6% |
|
Invesco DWA Technology Momentum ETF PTF, |
10.6% |
|
NorthShore Global Uranium Mining ETF URNM, |
10.3% |
|
VanEck Vectors Junior Gold Miners ETF GDXJ, |
10% |
|
iShares MSCI Global Silver Miners ETF SLVP, |
10% |
| Source: FactSet, through close of trading Wednesday, April 7, excluding ETNs and leveraged products | |
| Top 5 losers of the past week | |
|
United States Natural Gas Fund LP UNG, |
-6.2% |
|
Invesco DB Energy Fund DBE, |
-5.3% |
|
Franklin FTSE Russia ETF FLRU, |
-3.1% |
|
Global X MSCI China Utilities ETF CHIU, |
-2.8% |
|
Nifty India Financials ETF INDF, |
-2.3% |
| Source: FactSet, through close of trading Wednesday, April 7, excluding ETNs and leveraged products | |
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