Dan Barnes Welcome to ETF TV News – your weekly updates on newly issued products in the exchange-traded funds and exchange-traded notes Universe. I’m Dan Barnes. Joining me this week are Som Seif, CEO and founder of Purpose Financial and of course, Deborah Fuhr of ETF TV. Som, Debbie, welcome to the show.
Som Seif Great to be here, Dan.
Debbie Fuhr Great to be here.
Dan Barnes Debbie, can you give us an update on the latest products we saw issued over the previous week?
Debbie Fuhr So we had only 14 new listings last week, and that was driven, I think, primarily by the fact that Monday was Presidents Day in the US, so a holiday. We saw 31 new listings, we had 13 firms bringing products to market on seven different exchanges. Two were Bitcoin, two were commodity, three were equity, seven were fixed income, including two ESG fixed income, which is part of that theme of moving towards ESG and four were active.
Dan Barnes That’s great Debbie, thank you very much. Now we’re going to talk about the latest Bitcoin ETF. And this is, of course, coming from Canada, which has been a leader in innovation in the exchange traded funds market from day one, hasn’t it?
Debbie Fuhr It has. So we’re almost at the 31st anniversary of the listing of the first ETF ever, which came out of Canada, March 1990 – The TIPs ETF. And if we look at Canada, we saw that assets broke through 203 billion US dollars at the end of January. And we’ve really seen that Canada and also Som has been an innovator. Som developed the Claymore family of ETFs that was sold to BlackRock a number of years ago. And now Som has been able to bring the first Bitcoin ETF to market globally. Can you talk a little bit about the structure of your product? Is it physically backed? Is there a normal creation/redemption process as we see in typical ETFs?
Som Seif It is physically backed, and actually, that’s what is unique about it; it is the first physically backed ETF in the world, it’s a pure play ETF. You know, you’d ask why would investors want an ETF versus potentially going and buying some other vehicle, like a closed end fund or even just going buying crypto themselves? As you know, crypto is a very clunky and very difficult asset. If you’re a deep technologist, you can go and mine it, buy it and put it into your own sort of wallet, which, of course, there’s lots of great stories about people who’ve lost their passwords or even lost the keys themselves. Or you’re going to go and open up a separate account at a different crypto brokerage or an exchange like Coinbase. And for most people, that just doesn’t happen. If you’re a registered investment fund or an institutional investor, you know, you’ve got to go build the pipes with the custodians, you’ve got to go and get all the stuff integrated. So having an exchange traded fund really opens up the market to this asset in a more unique way than it’s ever had.
Debbie Fuhr What type of investors do you think will be investing? I mean, you had a phenomenal start, two days of trading in assets, I think reached 421 million, so that’s pretty amazing.
Som Seif What we’re seeing right now is a mix of both retail and institutional flow. What was really cool is starting to see institutions come in on the second day more aggressively once they saw the efficiency of the trading, you start to see institutions really start to pay attention. And what we really haven’t seen yet is the fundamental institutions, and I think that’s going to be the really important one. The long investors that have been trying to get exposure to this asset in their portfolios for some time in an efficient way, but just haven’t been able to and are now going to. And I think that’s going to be a really big leg up in the in the structure going forward.
Debbie Fuhr There’s been concerns about the premiums on other products. How have you seen your product trading?
Som Seif We did a lot of work in advance, bringing in some amazing high caliber traders from Canada and the United States to really help ensure efficiency. And that continues, we’re actually adding more and more market makers every single day. We closed on Friday right at NAV, which is wonderful. And I’ve traded anywhere from sort of a 1 to 3% premium throughout the day. And I think we’ll see that tighten over the next couple of days. As you know, market makers with a unique asset that they’re trading for the first time, and many times, they want to sort of see how the flow works and they’re just getting settled in right now. So we’re going to see a lot more competition and driving, and I think we’ll see this thing trading even more efficiently and tighter, but I’m really happy with the first couple of days of trading.
Debbie Fuhr Do you think we also will see products soon come to market in the US?
Som Seif No question. I think the SEC is going to feel a little bit of pressure. I mean, if they ever do, to see why they can’t do this. And my guess is that they’re going to be much more open minded to it. You know, it just makes sense. They’ve already enabled, as you can see, the grey to scale fine, but it’s trading inefficiently and it’s average premium has been in the thirties. It’s trading today at 10-12% premium. And you know what we’ve seen in Canada, what was quite amazing is that the Canadian closed end funds were trading at sort of 30, 25%, and then as soon as the ETF launched, they’re now trading at 10% discounts. Closed end funds, generally because of the liquidity structure, should trade at a discount, not at a premium, but because of supply and demand, the grayscale fund trades at a big premium. The SEC should be paying attention to this. The question will be, will it be in this year or will they take longer? And my guess is it’s sort of late 2021-2022 when they’ll open up the first product in the US.
Dan Barnes Som, that’s been great, thank you so much.
Som Seif Great to be here guys, and thanks for having me.
Dan Barnes So Debbie, maybe give us a little detail about some of the products we saw launched over the previous week.
Debbie Fuhr So I think some of the interesting trends that we saw was American Century has come out with two more products. We also saw that two fixed income ESG products have come to market. So I think a continuing trend around active, around ESG, and also around thematics. If we look at ESG, what we saw at the end of January is the industry broke through 200 billion, which is not a huge number, but it is significant that we’re seeing increasing money going in. The net flows for January were just over 19.8 billion, which is a record level. So I think a lot of new products this year will be focused on ESG. Many firms are switching their benchmarks to be ESG, so I think a lot is happening in the space.
Dan Barnes That’s been great Debbie, thank you.
Debbie Fuhr Thank you.