By Clayton Fresk, Stadion Money Management
The ETF industry is very serious. A constant barrage of data and analysis flows through the system. There are countless reports, articles, opinions, etc. that are disseminated every day. In the end, it is all very important, because eventually it comes down to putting the hard-earned money of the consumer to work.
But there are other ways to describe all of this output. It can be tedious, and more often than not, it can be downright boring. That is not downplaying the importance of the analysis to various users (investors, advisors, etc.). While there are some outlets that can put a lighthearted spin on investing and the industry, more often than not the seriousness (and potentially boringness) shines through.
The evolution of the ETF industry is following somewhat of this “investing is serious” path. (I am not positing this is necessarily a bad thing. First, they are looking to quantify what was previously more a qualitative approach by creating “Smart” (or enter your favorite adjective) Beta ETFs to replace active management. Next, they have looked to minimize/eliminate the exposure to “bad” companies by creating a plethora of ESG-focused ETFs. Now even religion has found its way in via what some pundits have called the “Bible ETFs”.
Once again, I am not saying any of this is wrong. However, maybe it is time for the industry to flip the script and start looking at more “Fun” ETFs. Of course, everyone’s opinion of what is fun is drastically different. In addition, fun may or may not lead to a favorable investment outcome. That being said, all of the following may just be wishful thinking, but here are some ideas for more fun ETFs.
Something that I would venture many people think is fun are sports. While there are limited opportunities directly in a sports team for the general public, there are related industries that are more available for investment. And as the ETF industry is well aware, having an index backing an investment idea is very important. One said index is the Solactive Sports Index, which “includes companies which are active in developing/producing athletic clothing as well as sports equipment”. While there is no existing ETF that invests solely in sports, the closest that I found would be FITS (the Health and Fitness ETF).
Some people would venture while sports equal fun, sports betting equals more fun. And there is an index for that too – the Solactive Sportwetten index, which “reflects the price movements of international companies that act as bookmakers for sports gambling and/or operate (online) media platforms for marketing sports gambling”. Now based on a very limited constituency, this one may be a bit trickier for ETF issuers to get on board with. While definitely not a 1:1 to a true sports betting ETF, an existing ETF that could be viewed in the same ilk is BJK (VanEck Vectors Gaming ETF), which has a predominant weighting to Casinos (and is one of the tops on the unofficial cool ticker list BJK = Blackjack).
Earlier I touched on the proliferation of ESG-focused ETFs. Again, while every person has their own definition of fun, I do not think it would be a stretch to say that there can be a bit of a no-fun lens put on these ETFs. In addition, while there are benefits to ESG investing, there can also be benefits to investing in companies/industries that are excluded from said ESG filters. An index that tracks a sampling of said companies would be the ISE SINdex, which “includes owners and operators of casinos and gaming facilities, producers of beer and malt liquors, distillers, vintners and producers of other alcoholic beverages, and manufacturers of cigarettes and other tobacco products.” Now ETF issues may be leery to create an ETF following this index, because an ETF was previously issued and closed that tracked said index (FocusShares ISE SINdex ETF). While not an indexed product, the mutual fund side of the equation has a similar type offering in VICEX (USA Mutuals Vice Fund) which offers the following to combat its anti-ESG tilt: Vice Fund is an investment, not a lifestyle choice. We offer a specific type of investment that has done historically well over the long-term. And while only a subset of the aforementioned index, WSKY (ETFMG Whiskey and Spirits ETF) can get an investor access to some of these same companies.
While I mentioned only a limited set of what can be deemed as “fun” ETFs, one aspect that I did not touch on is the investment merits of said potential/existing ETFs. That was a bit purposeful, as 1) that sort of analysis is available via other sources and 2) that sort of analysis can be deemed boring, which I attempted to avoid at least this time around! Maybe next time I will get back to the quantitative number crunching, but for now, I will just float some ideas out there and leave it at that.
Clayton Fresk is a Portfolio Manager at Stadion Money Management, a participant in the ETF Strategist Channel.
Disclosure Information
Past performance is no guarantee of future results. Investments are subject to risk and any investment strategy may lose money. The investment strategies presented are not appropriate for every investor and financial advisors should review the terms and conditions and risks involved. Some information contained herein was prepared by or obtained from sources that Stadion believes to be reliable. There is no assurance that any of the target prices or other forward-looking statements mentioned will be attained. Any market prices are only indications of market values and are subject to change. Any references to specific securities or market indexes are for informational purposes only. They are not intended as specific investment advice and should not be relied on for making investment decisions. One cannot invest directly in indexes, which are unmanaged and do not incur fees or charges. Founded in 1993, Stadion Money Management is a privately owned money management firm based near Athens, Georgia. Via its unique approach and suite of nontraditional strategies with a defensive bias, Stadion seeks to help investors—through advisors or retirement plans—protect and grow their “serious money.” Contact Stadion at 800-222-7636 or www.stadionmoney.com. SMM-052017-458