ETF Weekender: Watershed Moments for Volatility, BlackRock, and Bitcoin
(Bloomberg) -- Welcome to the ETF Weekender, your round-up of the biggest and most interesting stories from one of hottest corners of global markets.
In this week’s edition: The SEC is worrying about complex leveraged funds — just as it approves new ones. BlackRock is changing the way it handles proxy voting for major clients. And everyone is holding their breath on a Bitcoin ETF.
These are the stories you need to read.
Pump Up the Vol
What happened: Investors poured into complex leveraged products on the very day the Securities and Exchange Commission issued warnings over their risky nature. Still that didn’t stop the top U.S. regulator from approving new funds that reinvent two infamous volatility strategies.
Why it matters: Leveraged and inverse funds are magnets for controversy, yet many investors love them — as evidenced by the cash pouring in to catch a bounce in stocks. That’s why the SEC is in a bind. It greenlit the proposed new funds because they meet the rules, but just days later SEC Chair Gary Gensler announced that they were looking at the risks involved and possible new rules to protect investors.
Power to the People
What happened: BlackRock is handing more voting power to some of its biggest clients.
Why it matters: Was it pushed or did it jump? The asset manager’s move comes just as the SEC proposes new rules to make big funds provide more information about how they vote. At the same time, recent research shows that simply steering cash toward good companies and away from the bad creates little incentive for corporations to behave better. At least one thing’s for sure: The shift toward using voting power to affect change over buying power is gathering pace.
Approval Seeking Behavior
What happened: A Bitcoin U.S. ETF powered by the futures market could be approved this month — as many as four, in fact.
Why it matters: America is being left behind by Canada and Europe, where crypto products are now well established. Yet the U.S. market is still the biggest in the world, so issuers with first-mover advantage could suck in a lot of money.
Want more? Bonus weekend reading
- Gundlach’s DoubleLine Plans ETF Entrance With Stock, Bond Funds.
- BlackRock Alumni Want to Shake Up World of Junk-Debt Investing.
- Invesco Pairs With Novogratz’s Galaxy on Crypto-Flavor ETFs.
- Simplify’s New PINK Health-Care Fund Will Give Its Profits Away.
- Cathie Wood’s ARK Departs NYC With Shift to Florida Office.
Good Intel: Concentrate
A glimpse at the Bloomberg Intelligence analysis available on the terminal.
A wave of new ETFs will likely find it increasingly difficult to attract trading volume in an already crowded market. The 10 largest funds account for almost half of turnover, with a whopping 80% in products launched in 2008 or earlier. Since the start of 2020, 648 ETFs have come to the market — almost a quarter of the total. Yet only 30 introduced since the start of 2014 generated turnover exceeding $10 billion in the past 12 months.
This bullish fund uses derivatives to amp up its performance, so it’s supposed to be a short-term bet. Yet assets have swelled to more than $16 billion as investors flock to the product to ride the ongoing U.S. stock rally.
That’s the answer. The question identifying this fund will appear in the next edition. Last week’s question: What is the KraneShares Global Carbon ETF, ticker KRBN?
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