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Cryptocurrency continues to be a popular topic of discussion in the ETF world. Joining the ETF Report with Hosts Alexis Christoforous and Kristin Myerson Yahoo Finance, ETF Trends CIO and Director of Research, Dave Nadig, discusses what investors are doing while waiting to be more involved in such a popular space that has still no official ETF.
For Nadig, it’s about waiting for the SEC to approve one of the nine deposits currently available for cryptocurrency, mainly Bitcoin. Notably, the SEC released a schedule for the rest of the year, which did not include cryptocurrency. Some may see this as a sign, but Nadig doesn’t necessarily think it is, as some advice for the SEC could come to move things in a different direction in the months to come.
“I still suspect we’ll see approval by the end of the year,” Nadig said of the much-discussed Bitcoin ETF.
As for finding exposure to the space, despite the absence of an ETF, for clients, as Nadig notes, there are two options for those who wish to stick to the exchange-traded side. “Pink Leaf Trusts” are subject to large bonuses and discounts when people redeem them, which can be difficult.
Using a ‘spades and spades’ approach can also work well, as there are many new funds and deposits out there, including the Amplified Blockchain ETF (BLOK). Funds like this provide funds related to industry and companies that put Bitcoin on their balance sheets without direct exposure to Bitcoin.
A hedge against inflation
Turning to inflation, in terms of how investors should hedge against inflation, Nadig highlights the traditional way of doing it: relying on inflation-protected bonds. He also rates the commodities market, as the yields are in the bond market to make it interesting enough. On the other hand, commodities saw significant flows in ETFs such as the ETF Invesco Optimum Yield Diversified Commodity Strategy No K-1 (PDBC).
In the area of commodities, “you are betting that the price of oil, agriculture and industrial metals will be the things that are still missing when the pandemic is exited. So these are the places I would look, ”says Nadig.
Commodities are often a good bet. But, on the other hand, gold hasn’t held up lately, at least in the short term. So these are really generalized commodities, as far as advisers go.
Mutual conversion
More important news came from Dimensional Fund Advisors, as four mutual funds converted to mutual funds this week. All four funds come in with a whopping $ 29 billion in assets under management, and they keep their track records (Back to 2007).
The funds themselves are fairly straightforward index-type stocks. They are generally inexpensive, fiscally managed, well managed, technically active because they manage a low turnover and taxes. The ETF should only improve on this, as anyone can buy these products from the start.
Regarding the wider impact, Nadig believes other companies might be interested in doing the same. 401K plans that feature mutual funds make this difficult for some companies because ETFs trade differently. Notably, this is because Dimensional’s mutual funds were tax-managed, it allowed them to be more easily set up for conversion.
It will really depend on the big brand funds, as far as the conversion goes in the future, as they won’t be able to convert the 401K parts of those funds. Instead, clone funds will likely continue to be started by companies like American Century or Fidelity.
For more market trends, visit ETF Trends.
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