ETF TV News: Continued issuance for inflation hedging ETPs

Dan Barnes Welcome to ETF TV News – your update on newly listed ETFs over the past week. Joining me is Deborah Fuhr. Deborah, welcome back to the show.

Deborah Fuhr Thank you.

Dan Barnes Can you tell us in terms of numbers, how are we doing for issuance over the past 7 days?

Deborah Fuhr We’ve had 21 new ETFs come to market. 11 were in the US, two were in the UK, one in Stockholm, three in Canada, three in Korea and one in Hong Kong. So really a global set of offerings. We had 14 different issuers bring products to market and it’s been a mixture of various asset classes, again, ESG, some thematics, some ETNs, some ETFs.

Dan Barnes Some of the big things we’ve seen, obviously, ESG, golds, and last week we found a Bitcoin ETF. Are we seeing more of those sort of inflation, hedging-type ETFs from the gold and crypto space?

Deborah Fuhr We are, so this last week we saw one junior miner, so an equity based products, one 3X leveraged, one 3X leveraged and inverse, a physical gold productl and a new Bitcoin product that has, according to the issuer, zero annual cost, which is a unique offering.

Dan Barnes In terms of the diversity we’re seeing for gold. What do you think that might potentially mean for investors who are using ETFs?

Deborah Fuhr I think it is interesting, because what we’ve seen is very significant flows into gold, mostly into physical this year. But I think for many, they see us at an inflection point because for many, when they were thinking about this year, it was COVID-19, there wasn’t a vaccine, so what was the future? The US election was another level of uncertainty. So for some, gold has been a safe haven. For others, it’s been an inflation hedge, so the concern around so much stimulus coming into the market, maybe there’s going to be inflation, I think, for people going forward now that we have vaccines, you are seeing that some are thinking maybe gold is not as important of an asset class allocation going forward in 2021. So I think these leverage and leveraged & inverse are ways to play on expectations of different outcomesl that are expected from investors over the course of 2021. And then for many, I think Bitcoin is something that many see as the new gold. So I think that’s an interesting offering. Currently, Europe is the only place where you’re allowed to bring to market ETNs or ETPs on crypto. The US has been debating this for a number of years and given the changes in the SEC commissioners, because of the election, we don’t expect anything to happen there, at least for quite some time into 2021.

Dan Barnes We have seen some regulatory clarity around the bitcoin and crypto space. Are there still challenges around understanding how tax works for any earnings from crypto?

Deborah Fuhr Yes, I think given it is a new investment, there is some challenges around tax, both for if you’re holding it within a closed end fund, whether you’re holding it directly. I think for many investors that is something where there’s not clarity and it will come down to, ‘what is your domicile as an investor? What is the domicile and type of product you’re holding it in?’ With holding insider-products typically, as well as when income is paid out, and then you have to look at capital gains and other things. So I do not think that, that is set around the world for all investors, given they’re not available around the world.

Dan Barnes That’s really interesting, as we see more of these products coming to market, that could become increasingly important with authorities paying attention to them. Do you expect that this is going to be a growing concern and also a continuing trend in terms of new issues?

Deborah Fuhr Well, I do think if the US allows for crypto products come to market, we’ll see a lot of new products come to market. And clearly, once it’s in an ETP wrapper in the US, I think that we’ll see significant increase in the use of the product, and understanding the tax and also regulatory rate for different investors, so are they allowed to hold this? How much can they hold? So I think a number of new questions come to light as there’s more products in the market.

Dan Barnes That’s fantastic. Deborah, thank you so much.

Deborah Fuhr Thank you.

Published on December 9, 2020