Industry Updates

Inverse Cramer ETF becomes reality

Meme Twitter account set to become a reality

Theo Andrew

Jim Cramer

Tuttle Capital Management has filed to launch two ETFs going short and long the views of celebrity analyst Jim Cramer.

The presenter of CNBC’s Mad Money (pictured) is well known for his extroverted market options and is often the butt of many social media jokes for his off-the-cuff investment takes.

The Inverse Cramer ETF (SJIM) and the Long Cramer ETF (LJIM) will be based on little more than the Cramer stream-of-consciousness, and despite being unlikely to inspire much interest this side of the pond, it follows several similar strategies launched in the US over the past year.

Last November, Tuttle launched the inverse ARK ETF which shorts the position of the celebrity fund manager’s flagship strategy, the Ark Innovation ETF.

In March, the ‘Nancy Pelosi ETF’ internet meme turned into reality following the launch of the Insider Portfolio ETF (INSDR).

SJIM and LJIM will be actively managed and will have “at least” 80% of the fund’s investment in securities – 20 to 25 stocks equally weighted – mentioned by Cramer either on his TV show or via Twitter.

Both ETFs will exit positions once Cramer has no view on them and if profit targets are met, or, in response to large price swings that could negatively affect the performance of the funds.

Henry Jim, ETF analyst at Bloomberg Intelligence, said the reaction to the ETFs, which filed on 5 October, has been overwhelmingly favouring the Inverse Cramer ETF.

Despite the filings, he suggested regulators may raise questions regarding the strategy.

“Although investment theses based on the opinions and rantings of a single individual is rife in asset management, the investment rationales are usually afforded a semblance of respectability and credibility by being accompanied by due analysis and by being properly articulated,” he said.

“This is not the case with these two ETFs, and the Securities and Exchange Commission (SEC) may require further justification in the name of investor protection.”

Furthermore, the simplistic approach may not capture all of Cramer’s variables.

An academic study titled, TV Financial Analyst Predictive Power: The Case of Jim Cramer of Mad Money, analysing his investment calls over the past 15 years found that his accuracy may be limited to “positive and buy recommendations”.

Another paper by Jonathan Hartley and Matthew Olson of the Wharton School of the University of Pennsylvania found Cramer’s recommendations underperformed the S&P 500 total return index between 2001 and 2017.

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