This Week's ETF Launches: Another Blockchain ETF With an AI Twist
Blockchain, the technology underlying bitcoin, continues to be all the rage on Wall Street.
With bitcoin ETFs getting shut down by the SEC, fund providers are looking to offer the next best thing – blockchain ETFs. This week, the fourth such product within just the past month makes its debut.
Here are this week’s new fund launches:
Ticker | Name | Issuer | Launch Date | ETFdb.com Category | Expense Ratio |
|---|---|---|---|---|---|
(JPMB n/a) | JPMorgan USD Emerging Markets Sovereign Bond ETF | 01/29/2018 | 0.39% | ||
(KOIN n/a) | Innovation Shares NextGen Protocol ETF | 01/30/2018 | 0.65% | ||
(TMFC n/a) | Motley Fool 100 Index ETF | 01/30/2018 | 0.50% | ||
(RPUT n/a) | WisdomTree CBOE Russell 2000 PutWrite Strategy Fund | 02/01/2018 | 0.43% | ||
(KURE n/a) | KraneShares MSCI All China Health Care Index ETF | 02/01/2018 | 0.79% |
For a list of all new ETF launches, take a look at our ETF Launch Center.
Innovation Shares Marries Blockchain with Artificial Intelligence
Cryptocurrencies and artificial intelligence are two of the hottest themes in investing right now, so imagine the potential in a strategy that targets both at once? The Innovation Shares NextGen Protocol ETF (KOIN n/a) starts with a broad initial universe of companies, and then uses artificial intelligence to determine how engaged in the development or use of blockchain these companies are. The index creator’s natural language-processing algorithm looks for specific keywords within industry texts and online media to identify companies that are tied to blockchain technology. The fund currently reads more like a large-cap tech fund than a pure-blockchain play, with holdings such as Amazon (AMZN), Microsoft (MSFT), Visa (V), Intel (INTC), Cisco Systems (CSCO) and Nvidia (NVDA). It has just around 40 components and invests one-third of the portfolio overseas.
WisdomTree Launches Risk-Controlled Small-Cap Strategy
Writing options can be a great way for a fund to generate extra income, but it can also alter its risk/return profile. The WisdomTree CBOE Russell 2000 PutWrite Strategy Fund (RPUT n/a) will write short-term at-the-money put contracts on the Russell 2000 and attempt to collect the option premiums without the options finishing in-the-money. This can be a winning strategy if the Russell 2000 Index continues to post gains, since, in that scenario, the put contracts would expire worthless. In a down market, however, losses could be amplified. WisdomTree touts the overlay strategy as providing the chance to earn above-average risk-adjusted returns, while lowering overall portfolio risk.
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The Motley Fool Goes from Stock Picking to Money Management
The Motley Fool is a popular investor website that provides financial learning, including stock picks, tips on how to invest, retirement planning guidance and a list of the best credit cards available. The website dips its feet into the ETF marketplace by offering a new product that invests in its top stock picks. The Motley Fool 100 Index ETF (TMFC n/a) is designed to invest in the 100 largest, most liquid U.S. companies that have been recommended by The Motley Fool’s analysts and newsletters. The fund looks very similar to the S&P 500 at the top, with top holdings including names like Apple (AAPL), Microsoft, Amazon, Alphabet (GOOG) and Facebook.
JPMorgan Looks to Capitalize on Emerging Markets Rally
Emerging markets has been one of the world’s best-performing segments, with lots of money flowing into both equities and fixed income. The JPMorgan USD Emerging Markets Sovereign Bond ETF (JPMB n/a) has the appearance of a broadly diversified portfolio of fixed- and floating-rate bonds, but it also applies filters for liquidity and country risk. It looks to spread its bets across multiple credit ratings in order to diversify. Emerging markets bonds are intriguing because they offer yields of 3-4% and higher. Since these come from less developed areas of the world, many of these bonds fall into the junk category, with roughly two-thirds of the portfolio rated as below investment grade. The fund’s expense ratio of 0.39% is one of the cheapest among emerging markets bonds ETFs.
KraneShares Finds Potential in Chinese Healthcare Companies
KraneShares specializes in funds focused primarily on China and the emerging markets. This week, it offers a new sector-specific fund from the region. The KraneShares MSCI All China Health Care Index ETF (KURE n/a) can invest in companies of all sizes within the rapidly growing sector. According to the fund’s website, China’s healthcare market is growing at a compound annual growth rate of 17%, with total healthcare expenditures in the country estimated to grow to more than $1 trillion by 2020. The fund can invest in pharmaceutical companies and biotechs, as well as producers of medical equipment and traditional Chinese medicines.
The Bottom Line
The blockchain ETFs are popping up at a furious pace and struggling to differentiate themselves. This is the first of the funds to use AI as a means of selecting names, but, like the other blockchain ETFs, this is more of a broad tech fund. The precedent set by The Motley Fool website crossing over into money management is one that could potentially be replicated by others down the road. Emerging markets is a hot segment of the market, so it’s not surprising to see J.P. Morgan bring a new fund to market, despite already having their name attached to the two biggest emerging markets bonds ETFs available, namely iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB A-) and VanEck Vectors J.P. Morgan EM Local Currency Bond ETF (EMLC A-).
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