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Jan. 29, 2021, 7:29 a.m. EST

ETF Wrap: Sons of anarchy and dividends of aristocrats

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By Andrea Riquier

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Neither company could remotely be considered growth-y, although that’s probably to be expected from dividend-payers. And while each may technically be tech-sector, they’re by no means the FANG stocks many investors use to juice returns.

Exchange-traded sundries

  • Last week, MarketWatch wrote about investors snatching up shares of an existing ETF — the Procure Space Fund — that a new ARK Invest product is likely to mimic. As a status report, “UFO” now has $89 million in assets , more than doubling its holdings since ARK’s announcement. One individual stock likely to benefit, Virgin Galactic Holdings, is up 68% since that time.

  • JOYY — and no pain? The Infusive Compounding Global Equities ETF just topped $500 million in assets, with a pitch that seems tailor made for these dark days: the fund “targets goods and services that consumers seek out to find bits of joy or happiness. Examples include Amazon /zigman2/quotes/210331248/composite AMZN -1.57% (time-saving convenience) Netflix /zigman2/quotes/202353025/composite NFLX -1.78% and Disney /zigman2/quotes/203410047/composite DIS -3.20% (entertainment), Nike /zigman2/quotes/203439053/composite NKE -12.81% (health) and more. In the last 12 months, JOYY is up 30%, about double the return on the S&P 500.

Is there an ETF for that?

Well… yes and no.

The past year or so has seen a crush of products coming to market that promise to offer downside protection and upside amplification . Now comes another option – but not in ETF form.

The Hercules Fund, launching this week , uses options, like puts and calls, as well as a few other things, including volatility-linked ETFs, with its aim to deliver that protection/amplification combo. It also diversifies from more traditional asset classes like stocks and bonds. It will use a mutual fund wrapper, with a unique twist: a “2 and 20” fee structure like hedge funds: 2% is a management fee; 20% is a performance fee.

Hercules is a Los Angeles-based firm founded by semi-pro football player James McDonald. The new fund’s strategy is something the firm employs successfully for existing clients: Hercules says it returned 34% from March 1 to Sept. 30 of last year, more than double the 15% increase in the S&P 500 in that time.

McDonald is candid when asked why he’s chosen this unusual vehicle. “We offer high skill compared to a mutual fund and liquidity and accessibility compared to a hedge fund,” he told MarketWatch. (Hercules won an industry award for the strategy) “No ETFs have ever taken this approach with a two-and-twenty fee structure.”

And why is that fee structure important? “Because my goal is to buy an NFL team.”

McDonald is very serious about his goal, but as marketing material for the fund argues, “This incentivizes Hercules Investments to deliver value for the mutual fund’s shareholders. Most mutual funds simply charge an annual management fee and aim to outperform a benchmark.”

Perhaps more intriguing, however, is the question of which NFL team McDonald can aim to buy. Is there a betting pool for that?

Read next: 3 ETFs for the reopening trade

Visual of the week

Source: Jim Reid, Deutsche Bank, who adds: “The question I have is whether this is a fascinating curiosity or whether it’s indicative of a larger problem for global markets in 2021.”

Weekly rap

MarketWatch has launched <STRONG>ETF Wrap,</STRONG> a weekly newsletter that brings you everything you need to know about the exchange-traded sector: new fund debuts, how to use ETFs to express an investing idea, regulations and industry changes, inflows and performance, and more. Sign up at this link to receive it right in your inbox every Thursday.

/zigman2/quotes/210331248/composite
US : U.S.: Nasdaq
$ 113.00
-1.80 -1.57%
Volume: 59.48M
Sept. 30, 2022 4:00p
P/E Ratio
101.13
Dividend Yield
N/A
Market Cap
$1151.19 billion
Rev. per Employee
$302,178
loading...
/zigman2/quotes/202353025/composite
US : U.S.: Nasdaq
$ 235.44
-4.27 -1.78%
Volume: 11.85M
Sept. 30, 2022 4:00p
P/E Ratio
20.94
Dividend Yield
N/A
Market Cap
$104.70 billion
Rev. per Employee
$2.75M
loading...
/zigman2/quotes/203410047/composite
US : U.S.: NYSE
$ 94.33
-3.12 -3.20%
Volume: 12.09M
Sept. 30, 2022 4:03p
P/E Ratio
54.82
Dividend Yield
0.00%
Market Cap
$171.97 billion
Rev. per Employee
$431,926
loading...
/zigman2/quotes/203439053/composite
US : U.S.: NYSE
$ 83.12
-12.21 -12.81%
Volume: 48.18M
Sept. 30, 2022 4:00p
P/E Ratio
23.58
Dividend Yield
1.47%
Market Cap
$130.39 billion
Rev. per Employee
$596,839
loading...

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