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11 Big Ideas for New ETFs Get a Reality Check on Trillions

11 Big Ideas for New ETFs Get a Reality Check on Trillions

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The market for exchange-traded funds is getting nasty. Especially for new ETFs. Carving out a niche for one is becoming increasingly difficult.

There are already more than 2,000 exchange-traded products out there and the market has started to feel saturated. Only about 1 percent of new ETF proposals actually ever make it to market, according to industry veteran Michael Venuto. And of that 1 percent that do, many of them will flop. A great concept, a clever ticker symbol and a sharp pitch -- something that’s both clear and powerful -- are crucial. So too is lining up seed capital. An ETF’s chance of success increases markedly if it comes with some initial money behind it.

So, given this trend, we dedicated this episode of Trillions to a competition in the newsroom -- a Shark Tank-esque sort of showdown -- to see which of our crack Bloomberg News journalists and Bloomberg Intelligence analysts could come up with the best new ETF proposals to unleash on the world. I was the judge, and the angel investor too, bankrolled with a notional $100 million to dole out to the three ideas I liked the best.

Here’s a breakdown of the 11 proposals -- in the words of the contestants themselves. Tune in to the podcast to find out who wins.

ERIC BALCHUNAS
TICKER: XMON
The stock market, just like most people, hates Mondays. It is the poorest performing day of the week, returning an average of -0.08 percent while every other day of the week returns between 0.04 percent and 0.08 percent, according to LPL Research, which looked at data going back to 1928. There are many theories on why this is the case: companies tend to put out bad news late on Friday; traders tend to dwell on bad news over good news over the weekend. This is where the CalendarShares S&P 500 Ex-Monday ETF comes in. Trading under the ticker XMON, the ETF will simply hold $IVV, a low-cost and highly liquid S&P 500 ETF, every day except Monday. It will sell IVV at the open on Monday and buy it back at the close. XMON will charge a minimal fee of 0.15 percent.

MORGAN BARNA
TICKER: ELIV
A U.S. equity theme fund focused on the growing market for live entertainment could ride the tail of states legalizing sports betting, and eSports’ mounting audience (with its new publicly listed companies Super League Gaming, Modern Times Group, Allied Esports International). MGM Resorts, Boyd Gaming and Eldorado have made notable plays in sports betting. Anchor holdings that benefit from rising ticket sales will help round out the fund - Live Nation, TripAdvisor, Eventbrite, and Madison Square Garden.

RACHEL EVANS 
TICKER: SHTK
Trading under the ticker SHTK, to conjure up images of a Shark Tank-type showdown, the SCHTICK of this fund is to invest in the mega caps of the future -- just like the sharks on the show. The fund will track an index of the 500 most recently listed U.S. companies, which it will equal weight -- rebalancing quarterly to limit trading costs. This thematic fund will charge 40 basis points, undercutting the average thematic product as well as IPO-focused funds already on the market.

ANNIE MASSA
TICKER: IDO
Here’s a proposal every investor will love: the Wedding ETF. Trading under the ticker IDO (get it?), this thematic ETF tracks an index of companies positioned to profit from the growth of the $72 billion U.S. wedding industry. The list includes Tiffany & Co. and retailers like Nordstrom Inc. and technology companies like Amazon.com Inc., a new favorite option for wedding registries. U.S. couples spent an average of $44,000 getting married last year -- according to Brides.com, that is -- and this figure is rising as more millennials turn to their parents to foot the bill for their nuptials. Investors can participate in that growth, or alternatively bet against the institution of marriage by shorting IDO. It has a 0.5 percent expense ratio and re-balances quarterly. Disclaimer: for this fund and any committed relationship, past performance may not be indicative of future results.

SARAH PONCZEK
TICKER: GENZ
This year, Gen-Z is expected to surpass Millenials as the most populous generation, and a new exchange-traded fund, the Influencer Economy ETF (GENZ), will be prepared to capture the shift. Gen-Z grew up on social media platforms like Instagram and Snapchat, and the influencer culture is real. GENZ the fund will invest in companies that partner with the top 20 influencers, from athletes, to actors, public figures and more. As of now, top holdings include Electronic Arts, Nike, Abbott Labs, Adidas, Coca-Cola, T-Mobile and Under Armour based off of partnerships with the likes of Cristiano Ronaldo, Selena Gomez, Ariana Grande and Dwayne “The Rock” Johnson.

ATHANASIOS PSAROFAGIS
TICKER: RJKT
This ETF is a contrarian play and essentially looks for the island of misfit toys -- those out of favor with Factor ETFs. RJKT, pronounced ‘reject,’ will buy stocks that are not included in factor indexes (value, momentum, etc). As factor investing continues to grow and most assets are chasing the same factor stocks, this ETF looks to feed off that trend and hold stocks that have been shunned and priced inefficiently and are, as a result, poised to outperform over the long term.

JAMES SEYFFART
TICKER: RONN & ROFF
The Risk On and Risk Off Equity ETFs. These would be a pair of ETFs where an investor would purchase a basket of "Risk On" or "Risk Off" factor and sector ETFs. The Risk On ETF would consist of growth, momentum, size, and high-beta factor ETFs and would also hold Tech and Consumer discretionary sector ETFs. The Risk Off factor ETF will hold Low Volatility, Quality, Value, and Dividend Factor ETFs and would also hold Consumer staples and Utilities sector ETFs. Backtests show that over bull market ranges, the Risk On ETF will outperform the broader market but underperform in risk-off markets. Backtests show that the Risk Off ETF will underperform the broad market in bull markets but outperform in bear markets or downtrends.

BEN STEVERMAN
TICKER: CITY
Investors should be thinking about long-term trends that they can exploit. One prominent example is urbanization. Almost everywhere you look, cities are booming and rural areas are struggling. This ETF will profit from the boom. It’s not merely an infrastructure fund – most of which are heavily concentrated in pipelines and capital equipment associated with fossil-fuel industries. CITY is a diversified ETF of companies from around the world that will benefit from urban economic growth. Components include: real estate investment trusts with urban portfolios; banks with metro-area footprints; industrial companies that specialize in cranes, elevators, and mass transit; and retail and consumer brands focused on urban, sophisticated consumers.

JOEL WEBER
TICKER: FITY
Every year, Bloomberg Businessweek partners with Bloomberg Intelligence for 50 Companies to Watch. In addition to identifying businesses poised to release products or services with blockbuster potential, we also highlight a few that face unusual challenges in the coming year. We consider revenue growth, margins, market share, debt, and more in our selections. A portfolio manager recently messaged me: "Forty of the companies listed are up substantially since Jan. 1...can I borrow your crystal ball?" To that end, I propose updating our list quarterly and turning that index into an equal-weighted ETF that will re-balance quarterly. The fund will go long 40 stocks and short 10.

CAROLINA WILSON
TICKER: FRAT
FRAT, the college-focused consumer ETF, is a win-win for issuers and money managers trying to carouse the next generation of cash. Why not give them a theme that they’re all too familiar with, holding products that have governed their day-to-day lives? FRAT will go long stocks like Monster Energy, Electronic Arts, and the cannabis industry — and will short just one stock, Navient, the student loan company.

SUZANNE WOOLLEY
TICKER: EVIL
Sure to appeal to the nihilists and misanthropes among us, EVIL (yes, the ticker symbol is available) invests in companies that play to people’s baser instincts and provide products or services harmful to society in some way. The ETF could invest in companies promoting unhealthy snack food, vaping, or gambling, for example. Many people indirectly profit from “bad” things via companies owned in index funds and don’t think twice about it; this is a more honest, targeted approach designed to appeal to investors who have tired of politically correct investment product pitches. It will have a high expense ratio of 0.666 percent, just because it’s fitting and also because some might consider a high expense ratio evil, so it’s all very meta.

To contact the editor responsible for this story: Magnus Henriksson at mhenriksso10@bloomberg.net, Larry Reibstein

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