Industry Updates

ETF Wrap: Does Europe need an inverse Cramer ETF?

Personality investing, abrdn’s Europe debut and CSDR woes made headlines this week

Jamie Gordon

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The US gained yet more personality ETFs this week in the form of long and short strategies on TV personality Jim Cramer but does Europe need similar products or are they just ‘mad money’?

Tuttle Capital Management listed its long-awaited short and long ETFs seeking to bet against and in line with the stream of consciousness of CNBC’s divisive investing personality.

The strategies will equally weight securities and will aim to hold positions for no longer than a week.

Speaking, the issuer’s CEO Matthew Tuttle said the strategies will be actively managed and rely on the discretion of managers to judge which stocks to go or short on based upon Cramer’s Mad Money programme and social media channels.

Tuttle already has a short ETF betting against the innovation strategy of active ETF figurehead Cathie Wood, however, the firm’s CEO said Wood was not a household name in the same respect as Cramer.

The ETFs both come as part of a wider trend towards wrapping the stock-picking convictions of public figures in a liquid basket of securities, with other notable mentions including an ETF tracking the stock ownership filings of former Speaker of the House Nancy Pelosi and more recently ETFs tracking the aggregate investments of Republican and Democrat congresspeople, respectively.

As for the impact of such strategies, it is difficult to not at least be interested in how they work or charmed by the creativity of the ETF issuers behind them but the merits of investing in individual personalities and the methods they employ to do so probably mean they deserve healthy-sized warning stickers.

Aside from potentially lagging the stock picks of personalities by a few days or more, these discretionary hijinks can come at a cost as seen with the 1.2% fee attached to Tuttle’s Cramer ETFs.

It is fair to say the US and Canada offer more exotic ETF line-ups than on this side of the pond – see psychedelics, conservative values and FOMO – but it should be understood that many of these have a fundamentally different use case than the vision of low-cost diversification set out by Jack Bogle when he invented the first index funds for long-term investing.

These ETFs are fun and should be viewed as such. In Europe, the dominance of a couple of thematic ETFs such as BlackRock’s clean energy and Legal & General Investment Management’s cybersecurity show adventurousness in the old continent only goes as far as sensible bets on future sectors.

With a growing but far smaller retail market in Europe, ETF investing is seen more as an act of prudence and less as a social or hobby activity. To this end, rolled-up-sleeve, goatee-clad men shouting about stocks are unlikely to make their way into UCITS ETFs any time soon.

abrdn enters European ETFs

However, one active ETF house that has managed to bring its ETFs to Europe is UK giant abrdn, whose former CEO Martin Gilbert previously said not launching an ETF business this side of the pond was among his main regrets while at the helm of the firm.

The firm debuted The Global Real Estate Active Thematics (GREAT) UCITS ETF (R8TA) on the Deutsche Boerse with a fee of 0.40%.

R8TA is benchmarked against the FTSE EPRA NAREIT Developed index and actively invests in real estate securities across 28 markets.

abrdn’s entry comes after ETF Stream revealed the firm had registered two ETFs with the Central Bank of Ireland last November. The firm becomes the latest large asset manager to enter European ETFs since AXA Investment Managers launched its first ETFs last September.

CSDR coming at a cost to end investors 

While the Central Securities Depository Regime (CSDR) was meant to harmonise securities settlement, experts warned the regulation is seeing authorised participants (APs) widen bid-ask spreads to counteract the financial penalties they incur for not settling on time.

The initial roll-out of CSDR involved a number of complications surrounding enforcement and reporting of penalties which led to months of delays.

The recent feedback on settlement failure penalty costs being passed on to end investors follows analysis by the Bank of England, which found CSDR penalties had “not made a large improvement so far” with market makers intentionally choosing to delay settlement after weighing up penalty costs versus the cost to create a new product.

Gavin Haran, head of policy for asset management at MacFarlanes, concluded policymakers might decide mandatory buy-ins to be the only route to solving poor settlement rates, however, he noted such a step would increase the costs of all trades.

ETF Wrap is a weekly digest of the top stories on ETF Stream


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