1) Morningstar and iShares Join Forces to Lead the Industry in Style Investing
iShares | 12/15/2020
Because… We are unsure if the change to the new Morningstar Broad Style Indexes could bring a greater asset-gathering success for iShares. First, three funds will change their names. Morningstar Large-Cap Value ETF, Morningstar Large-Cap ETF, and Morningstar Large-Cap Growth ETF will be renamed Morningstar Value ETF, Morningstar U.S. Equity ETF, and Morningstar Growth ETF, respectively. It will be hard for investors to tell market size of securities in each portfolio from new fund names unless they take a closer look at the indexes those funds track. Second, iShares already offers size and style-based ETFs that follow the S&P and Russell indexes. Investors will have a tough time figuring out if new Morningstar indexes can trump the others. For example, iShares S&P 500 Value ETF had $19 billion of assets with an expense ratio of 0.18%. iShares Russell 1000 Value ETF had $45.1 billion with a 0.19% fee. iShares Morningstar Large-Cap Value ETF had $558 million with a fee of 0.25%. Investors are likely to choose a fund based on its size, cost, liquidity, and trading volume unless they have a clear preference for Morningstar.
2) Invesco Launches its First Active Non-transparent ETFs
PR Newswire | 12/22/2020
Because… By launching four active non-transparent ETFs, Invesco became one of the first movers in the space. Since their inception on December 22, 2020, each of the four funds had $1.2 million of assets as of January 7, 2021. At the end of October 2020, Invesco had $288.0 billion of assets in actively managed funds, which suffered net redemptions of $33.8 billion during the first 10 months of the year after bleeding $36.6 billion in 2019. Meanwhile, the firm held $252.1 billion in passively managed funds, which brought in $5.9 billion for the year after absorbing $12.4 billion in 2019. According to Morningstar data, Invesco had the second largest net outflows during the first 11 months of 2020 among all active mutual fund managers. Stemming outflows is critical because significant withdrawals could have a negative impact on investors’ perception of the firm’s active products. While Invesco does not want to lag behind, adding non-transparent active ETFs when no one is sure about their market potential at this stage will not be able to compensate for Invesco’s sizable loss.
3) VanEck Files Again with SEC to Introduce Bitcoin ETF
TheStreet | 12/31/2020
Because… The bitcoin price has surged past $40,000, less than a week after hitting the $30,000 mark and less than a month after breaking $20,000. From its price of $8,045.51 a year ago and $28,990 on the last day of 2020, the cryptocurrency gained fivefold for the past 12 months and nearly 40% since the beginning of the new year. However, Wall Street professionals have vastly different opinions of bitcoin’s future direction. A Bank of America strategist considered the bitcoin rally “the mother of all bubbles,” whereas JP Morgan projected that the bitcoin price could reach $100,000 in 2021. Despite the controversy, investors have been embracing the digital currency. Assets of Grayscale Bitcoin Trust ballooned to $23 billion from $4.8 billion at the end of September. Bitwise 10 Crypto Index Fund has collected $533 million despite its 2.5% expense ratio. We expect more fund sponsors to come up with an alternative solution (e.g., trading over the counter) before having the SEC’s blessing to a bitcoin ETF.