Investor Alert

ETF Wrap

Nov. 20, 2021, 9:39 a.m. EST

Bitcoin-linked fund from ProShares logs worst weekly ETF performance as crypto prices slump

By Mark DeCambre

Hello there! This is the final ETF Wrap of November, as we won’t publish one, on Thursday’s Turkey Day. Still, we’ve got some good bits on the exchange-traded fund industry this week to tide readers over, including a few new launches.

So, Happy Thanksgiving to all.

In any case, send tips, or feedback, and find me on Twitter at @mdecambre or LinkedIn , as some of you are wont to do, to tell me what we need to be jumping on.

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Another dimension of ETFs

Bloomberg writes that quant-investing fund provider Dimensional Fund Advisors is deepening its suite of ETF offerings, with a plan to unfurl a number of new funds that could bring it to nearly two dozen offerings.

Earlier this week, the fund kicked off the actively managed Dimensional Core Fixed Income ETF (PSE:DFCF) , the Dimensional Short‐Duration Fixed Income ETF (PSE:DFSD) , Dimensional National Municipal Bond ETF (PSE:DFNM) and Dimensional Inflation‐Protected Securities ETF (PSE:DFIP) , which carry fees of no more than 0.19%.

The news outlet writes that Dimensional is shifting from being a late entrant to ETFs in November 2020, to one of the top 10 issuers by assets with $44 billion, citing Bloomberg data.

Dimensional manages about $653 billion overall, including $120 billion in fixed income, Bloomberg wrote.

“We’re going to see a lot of growth in systematic fixed income over the next decade. Hopefully we’ll be a part of that growth,” Dimensional’s co-CEO Gerard O’Reilly was quoted as saying.

ETF taxes

Offering, perhaps, a good follow up to those fixed-income launches, CFRA’s mutual fund and ETF expert Todd Rosenbluth offered a list of bond-related ETFs that aren’t likely to pay any capital gains. Those include iShares iBoxx $ Investment Grade Corporate Bond ETF (PSE:LQD) , SPDR Bloomberg Barclays High Yield Bond ETF (PSE:JNK) .

Beyond fixed, income Rosenbluth writes that an estimated 98% of equity ETFs offered by providers iShares, State Street Global Advisors, and Vanguard will pass along zero capital gains to existing shareholders in 2021, consistent with 2020 levels.

Why is this significant? After all, tax-efficiency is one of the hallmarks of the ETF wrapper.

Rosenbluth said that it is important to highlight utility of ETFs from a tax perspective, particularly, amid legislative rumblings that proposed to do away with ETFs’ tax benefits.

“Little to no cap gains was to be expected but it is an ongoing reminder why ETFs are gathering record equity ETF inflows in 2021,” Rosenbluth told ETF Wrap.

“Plus Congress floated the idea of removing the tax benefit of in-kind redemptions as part of revenue generation to offset the Build Back Better,” spending initiative. 

High stakes bet on cannabis?

MarketWatch’s Steve Gelsi writes that AdvisorShares and Poseidon longtime cannabis investor Poseidon Investment Management have launched an actively managed ETF aimed at providing individual investors access to U.S. cannabis companies barred from trading directly on the New York Stock Exchange or the Nasdaq.

Gelsi writes that big U.S. multistate operators such as Trulieve  TCNNF , Verano  VRNOF  or Curaleaf  CURLF are generally not available for investors to purchase directly in their brokerage accounts, as part of the federal ban on cannabis that prohibits cannabis company listings on the Nasdaq and the NYSE.

The AdvisorShares Poseidon Dynamic Cannabis ETF (PSE:PSDN) will target a portfolio of about 30 stocks initially focusing most exposure to the U.S. market across the cannabis and related sectors. The ETF, which is listed on the Intercontinental Exchange (NYS:ICE) -owned Arca platform, has an expense ratio of 0.92%. AdvisorsShares now has a trio of cannabis related funds, including AdvisorShares Poseidon Dynamic Cannabis ETF (PSE:PSDN) and the popular AdvisorShares Pure US Cannabis ETF (PSE:MSOS) , which was one of ETF Wrap’s top performers this week (see table attached).

The good…

Top 5 gainers of the past week %Performance
KraneShares CSI China Internet ETF (PSE:KWEB) 5.8
AdvisorShares Pure US Cannabis ETF (PSE:MSOS) 5.4
SPDR S&P Semiconductor ETF (PSE:XSD) 5.3
KraneShares Global Carbon ETF (PSE:KRBN) 5.2
Invesco Dynamic Semiconductors ETF (PSE:PSI) 5.0
Source: FactSet, through Wednesday, Nov. 17, excluding ETNs and leveraged products Includes NYSE, Nasdaq and Cboe traded ETFs of $500 million or greate r

and the bad

Top 5 decliners of the past week %Performance
ProShares Bitcoin Strategy ETF (PSE:BITO) -9.7
iShares MSCI Chile ETF (BATS:ECH) -5.9
U.S. Global Jets ETF (PSE:JETS) -4.4
NorthShore Global Uranium Mining ETF (PSE:URNM) -3.5
iShares MSCI Russia ETF (PSE:ERUS) -3.0
Source: FactSet

A bad week for ProShares

The bitcoin futures ETF run by ProShares was one of the worst performing ETFs among those that ETF Wrap screens for, and that’s not surprising considering the decline that bitcoin (COINDESK:BTCUSD) is down 10% so far this week. The ProShares Bitcoin Strategy ETF (PSE:BITO) still boasts assets of $1.26 billion, compared with its rivals.

The Valkyrie Bitcoin Strategy ETF (NAS:BTF) only has about $53 million in assets and VanEck Bitcoin Strategy ETF (BATS:XBTF) has less than $9 million. Both are also down but don’t meet our screening criteria for size.

The bitcoin futures-pegged ETFs also are challenged by so-called contango issues, which is a condition where prices are higher for longer-dated contracts. The net result is that the ETF will have to roll contracts at higher prices even as the spot market is lower.

Bitcoin prices are around $57,000, up 5.6% on CoinDesk and Ether (KRAKEN:ETHUSD) on the Ethereum network, was trading at $3,995, down 6%.

Black Friday

What inflation? U.S. retail sales are hot and recent figures underscore the fact that rising prices haven’t yet chilled consumer enthusiasm for buying things.

Indeed, retail sales surged 1.7% last month,  the government said earlier this week , marking the biggest gain since March when stimulus checks were being doled out.

The SPDR S&P Retail ETF (PSE:XRT) best highlights the rally in retail thus far in 2021. The ETF is up over 60% and has risen nearly 10% in November alone, FactSet data show. Company’s like Macy’s (NYS:M) , Abercrombie & Fitch (NYS:ANF) and Kohl’s Corp. (NYS:KSS) were surging on Thursday, with Black Friday next week. So far this year, Kohl’s is up nearly 50%, A&F is up 133% and Macy’s shares have surged 233%.

VanEck Retail ETF also is up but by a comparatively less dazzling 26%.

By comparison, the Dow Jones Industrial Average (DOW:DJIA) is up 22% so far in 2021, the S&P 500 index (S&P:SPX) has gained 25% and the Nasdaq Composite Index (NASDAQ:COMP) has climbed 24% thus far in the year.

Oddly, online retailers are declining, down 4.2% on the year, gauged by Amplify Online Retail ETF (PSE:IBUY) .

Good ETF reads

Link to MarketWatch's Slice.