1) Invesco Files for the Bitcoin Strategy ETF
SEC Filings | 8/4/2021
Because… Although the SEC has yet to give the green light, fund sponsors that are optimistic about bitcoin’s market potential are eager to be early movers. Besides Invesco, ProShares filed for a Bitcoin Strategy ETF on the same day. Van Eck and Valkyrie filed on Monday and Wednesday this week. These new ETFs will provide exposure to bitcoin futures contracts without investing directly in bitcoin. However, the recent selloff suggests that many investors cannot weather bitcoin’s price volatility. According to Bloomberg’s quote of CoinShares data, “Digital-asset investment products from Grayscale, Bitwise, 21Shares, and others saw outflows for the fifth straight week, the longest such streak since January 2018.” Bloomberg Intelligence’s own data also shows that bitcoin funds and futures are on track for a third straight month of outflows, the longest streak in data going back to 2014. Fund providers need to assess if there is real demand from its long-term holders and determine what risk control mechanism should be put in place if investors bail out in droves.
2) Active ETFs Buck the Passive Trend, Succumb to Fee Compression
FactSet | 8/5/2021
Because… According to FactSet data, active equity ETFs that gained market share during the first half of 2021 had an asset-weighted expense ratio of 0.53% at the end of June, compared to 0.11% for vanilla equity ETFs (i.e., traditional market cap-weighted ETFs) and 0.20% for strategic equity ETFs. On the fixed-income side, active ETFs that gained market share had an asset-weighted expense ratio of 0.52%, compared to 0.08% for vanilla ETFs and 0.31% for strategic ETFs. Currently, the fee gaps between active strategies and their passive counterparts are still wide. With more active ETFs entering the market, we expect the average fees of active ETFs to drop because it is easier for a low-cost fund to stand out before it can establish a solid track record. New active ETFs could take a page out of the book of Goldman Sachs ActiveBeta U.S. Large Cap Equity ETF, which set itself apart from its peers by launching with an expense ratio of 0.09%, significantly lower than the industry average of 34 basis points for smart beta ETFs. The fund has amassed $13.7 billion since its September 2015 inception.
3) Hartford Funds Enters ESG ETF Market
Business Wire | 8/11/2021
Because… Based on Morningstar data, 46 out of 201 ETF sponsors offered ESG ETFs, with combined assets of $97.3 billion as of June 2021. BlackRock dominates the space with $58.2 billion, accounting for 60% of the total. Invesco was a distant second with $9.6 billion. Vanguard ($7.3 billion), First Trust ($4.7 billion), and DWS ($4.4 billion) rounded out the top five. There was no ESG ETF in Municipal Bond, but BlackRock led the pack in International Equity with a 78.3% market share, Taxable Bond (77.7%), and U.S. Equity (61.5%). It only fell behind Invesco in Sector Equity. BlackRock’s ESG ETFs brought in $14.1 billion in 1H21 and $23.1 billion throughout 2020, representing 61.7% and 67.7% of the group’s total sales during the two respective periods. Vanguard was the second best-selling provider this year with $2.0 billion, while Invesco ranked #2 last year with $2.7 billion. Neither can compete with BlackRock in the space. We expect BlackRock to maintain its stronghold for the foreseeable future.