Liquid Alternative investments have emerged over the past decade as one of the fastest-growing areas within asset management. As pensions, endowments, foundations and other institutional investors have long benefited from Alternative Investments within their portfolios, Liquid Alternatives enable investors to have access to alternative investment strategies in fund structures that provide daily liquidity, full transparency, low investment minimums and other key attributes for investors. DailyAlts is your source for the most up-to-the-minute news, commentary and analysis on the global market for Liquid Alternatives.
Waratah Capital Advisors Ltd, a Canadian alternative investment manager, announced Monday its launch of the Waratah Alternative ESG Fund. The mutual fund is Waratah’s second liquid alternative offering, and is powered by the firm’s alternative ESG strategy.
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Liquid Alternatives: “It Should Go To Zero Faster Than It Did Last Time” – Jim Cramer on Crude Oil and USO
On Monday, the United States Oil Fund (NYSEARCA: USO) fell nearly 15% to close at $2.19. Weighing on the ETF was the latest announcement from USCF, the fund’s administrator, that the fund will close out its positions in the June WTIC futures contract, and roll them over to longer-dated contracts.
BNY Mellon has a 30-year track record in indexation and industry leadership in ETF sub-advisory services. Its index team currently manages $340bn for institutional and retail clients globally. As of April 16, it had $1.8 trillion in AUM. On Friday it rolled out five new ETFs listed on the NYSEARCA exchange.
Are stock ETFs a source of risk in the current environment? How did they perform under the weight of enormous flows, both in and out? These and other issues figured in a chat on “The Compound” between ETF Trends CIO and Director of Research Dave Nadig and Barry Ritholtz, Chairman and CIO of Ritholtz Wealth Management.
Most thought the ETF invested in spot oil, while it bought oil futures and rolled them over.
And therein lies the difference, or for a lot of chagrined retail oil investors, a hole in their pockets. The United States Oil Fund (NYSEARCA: USO) took positions in front-month oil futures and rolled them over every month. It did not, as retail investors mostly assumed, invest in the spot oil market.
The USO Fund LP has halted trading. Yesterday, the fund was largely responsible for pushing WTI May crude prices into negative territory. Crude prices effectively collapsed by 300%.
The United States Oil Fund LP (NYSEARCA: USO) said in a regulatory filing today that it would suspend buying of crude. This action suspends USO Authorized Purchasers from buying new creating new baskets. The WTI May contract expires today.
The price of WTIC crude crashed to as low as minus $37.63 per barrel on Monday. The seemingly absurd pricing was triggered by the expiry of May’s future contracts scheduled for Tuesday. A trader would have to receive deliveries on any May contracts remaining open, and store the oil at exorbitant rates.
As this is written Tesla, Inc (NASDAQ: TSLA), is trading at $761.20, up $6.96, or 0.96%. If shares of the electric vehicle maker end today (Monday) in the green it will be the eleventh straight day of gains for the stock. The stock has risen phoenix-like from a low of $454.47 touched on April 2. That’s a gain of over 67% in those eleven trading sessions. And sure, ETFs holding the stock would benefit from the massive surge in its price.
In a record-breaking March quarter, gold ETF holdings and assets added US$ 3 billion in net inflows, the largest quarterly gain in history, according to the World Gold Council. Over the past year, gold ETFs have boosted their AUM by 57%, the highest annual increase since the GFC. One beneficiary from this craze for gold was the Invesco Physical Gold ETC.
Rating agency Moody’s is stepping up its assessment of companies’ performance on ESG counts. An analysis of Moody’s (NYSE: MCO) private sector rating actions last year revealed that ESG risks were cited as material in a third of the cases.
With employment at historic lows, and most of America’s Main Street shut down, Trump’s $1 trillion infrastructure plan could deliver a dual advantage. It would give Americans work, and shore up the country’s infrastructure. A Bloomberg article suggests spending through the states, focused on roads and environmental infrastructure. The ETFs discussed below could be beneficiaries of this spending blitz.
American Century’s actively managed, non-transparent ETFs started trading earlier this month. American Century Focused Dynamic Growth ETF (BATS: FDG) and American Century Focused Large-Cap Value ETF (BATS: FLV) are not required to disclose their holdings daily. In this respect, they are more like mutual funds, and less like most ETFs – which disclose daily. Should mutual funds worry?
Fund issuer Direxion is jumping onto the remote working bandwagon.
It has filed with the SEC for the Direxion Work From Home ETF. The ETF will track the Solactive Remote Work Index. The Index comprises 40 U.S. listed securities and ADRs that have significant exposure to “work from home” needs. These are remote communications, cybersecurity, project and document management, and cloud technologies. Furthermore, the new ETF will trade under the ticker WFH.
The Fed could take a leaf out of the Bank of Japan’s (BOJ) ETF playbook to address the current economic crisis created by the coronavirus pandemic. The Fed has already taken a never-before step by announcing it stood ready to buy bond ETFs. If its current fire-fighting moves come up short, it might even have to buy stock ETFs – something the BOJ is a past master at.
The coronavirus pandemic throws up ESG in a new light.
Far from spelling doom for ESG investing, the pandemic may have given it fresh, positive potential. An article by Marlene Satter in benefitsPRO outlines nine ways the pandemic could affect ESG, yet launch it as the new normal in investing. And ESG ETFs could benefit from a fresh tailwind.
ITB is the largest ETF in the home construction space. It provides exposure to U.S. companies that manufacture residential homes by tracking the Dow Jones U.S. Select Home Construction Index. It currently has assets of $707.64 million and charges an expense ratio of 0.42%.
ITB may be ready to rebound, on account of both technical and fundamental factors.
Investors set up a record-breaking first quarter this year for inflows into U.S. money market funds. These funds gained from the massive risk-off sentiment that prevailed as investors realized the economic repercussions from the coronavirus. Investors dumped stocks and bonds and headed for the safety of money market funds.
Thursday, April 2, marks the beginning of a new era of active, non-transparent ETFs. In a brave step considering the current market conditions, American Century Investments will launch Thursday two new “active” ETFs. The American Century Focused Dynamic Growth ETF (FDG) and the American Century Focused Large Cap Value ETF (FLV) will list on CBOE Global Markets.
French asset manager Lyxor is the first ETF manager to launch a suite of ETFs that focus on the objectives of the European Union’s Climate Transition Benchmarks. These benchmarks target an immediate 30% reduction in carbon intensity and a 7% annual emission reduction trajectory.
It’s not at all unimaginable that the Fed could wade (further) into uncharted waters and mop up stocks. According to market experts, if the coronavirus leads to more panic and deterioration in the markets, the Fed will not hesitate to buy up stocks on a scale large enough to restore order. Given the present mood of the Fed, it may bring out the heavy artillery via purchases of stock ETFs.
Assets under actively managed ETFs constituted a minuscule percentage (< 3%) of total ETF assets ($4.4 trillion) as of end-2019. The most commonly attributed reason for this phenomenon is the fear that active managers face regarding their “secret sauce.” They are loath to make full daily disclosure of holdings as required by regulations for ETFs, as other fund managers and traders copy their strategies. However, a new breed of “non-transparent” ETFs that “mask” some or all of the fund’s portfolio, may soon become a reality.
These may be great for fund managers, but what about advisors and investors? Certainly, there is evidence of rising advisor interest in non-transparent ETFs.
HashCash Consultants are launching a new cryptocurrency, the Corona Fund Index Cryptocurrency (CFIX) in a drive to battle the COVID-19 pandemic crisis. The new crypto will launch on April 2 and trade on digital exchange PayBito, as well as other global exchanges. The CFIX crypto is backed by an inverse ETF tracking the S&P500.
Investors remain undeterred by the market turmoil and sustainability remains an investing priority. Accordingly, BlackRock has launched three ESG-screened, ultra short term ETFs in Europe. The ETFs are denominated in US dollars, euros, or pound sterling depending on the underlying investment-grade corporate bonds.
In a move aimed at ensuring liquidity in the bond market and related ETFs, for the first time, the U.S. Fed will purchase corporate bond ETFs. The Fed’s new facilities are the Primary Market Corporate Credit Facility (PMCCF) for new bond and loan issues, and the Secondary Market Corporate Credit Facility (SMCCF), to provide liquidity for outstanding corporate bonds.
There has been a sudden jump in the demand to borrow ETFs for purposes of shorting. Investors may be looking to short ETFs for various reasons, but one major factor is the sudden spike in the cost of options. Options are widely used for hedging strategies but have become expensive because of the intense, coronavirus induced volatility in the market in March. As a result, borrowing costs of ETFs have, on average, shot up 40% according to a report by data provider S3 Partners.