On this week’s episode of ETF Prime, host Nate Geraci is joined by Tom Lydon, CEO of ETF Trends, to discuss the recent challenges facing Cathie Wood’s ARK Invest. Diamond Standard’s Cormac Kinney is also on the show to talk about the development of a physically-backed diamond ETF. However, the main event this episode is a sit-down with ETF industry legend Jim Ross, who was instrumental in the launch of the first U.S.-listed ETFs.
Starting with Lydon, he first offers an update on Exchange: An ETF Experience, which recently was pushed out to April 11–14. Then, the topic segues into what’s happening with ARK Invest and Cathie Wood.
As Geraci notes, since hitting all-time highs in February 2021, ARKK is now down nearly 50%. ARK’s other ETFs are notching similar declines. But Lydon, who recently interviewed Wood, points out that many shareholders are still hanging tough.
“Most of the people are listening to the message that this is a long-term commitment, at least a five-year outlook, and they’ve been very clear on this,” Lydon adds. This speaks to the shifting dynamics of what’s going on in the market, including how the pandemic continues to have an effect, compared to Wood’s steadfastness through the turbulence.
“The big point here,” Tom adds, “it comes down to allocation.” This thought concerns the advisors who have had to deal with these shifts and volatile times. “So, what do you do? You don’t sell. You probably average up during this period of time, and we’re probably going to see more and more advisors, especially, do just that.”
The Godfather of ETFs
Sometimes referred to as “The Godfather of ETFs,” Jim Ross played a critical role in developing and launching the first U.S.-listed ETF, the SPDR S&P 500 ETF (SPY), which turns 29 years old this week. Ross has also helped launch many of the world’s other first ETFs, including the sectors SPDRs and GLD.
Recently, Ross has become chairman of a special purpose acquisitions company. It’s keeping him busy, and in this discussion, Ross looks back at the launch of SPY, along with how he sees the current state of the ETF industry, as well as a peek into a possible future.
Going back to SPY, Ross points out how he joined State Street back in 1992 and fell into the position where he could assist on the fund’s launch, due to his background as a CPA. While SPY wasn’t an immediate success, says Ross, soon investors came to understand its inherent flexibility and tradability.
As far as ETF innovation and current areas of opportunity go, Ross says that folks should expect the unexpected. Innovative concepts like non-transparent active funds may end up being a much stronger force in the industry than some may currently suspect.
Ross notes, “I think the ETF wrapper, in some cases, is just a different way of distributing your product. When you look at it that way, it makes complete sense for people to look at how they can look at their product in the ETF space, where they can list and trade it on exchange, and advisors who don’t want to buy mutual funds will want to buy this product.”
A Diamond in the Rough
Finally, the founder and CEO of Diamond Standard Trust, Cormac Kinney, joins the podcast to discuss his plans to bring a physically-backed diamond ETF to market. The underlying diamonds held by the ETF are actually embedded in a transparent resin coin that contains a wireless chip. These coins are tracked on the Ethereum blockchain. Were Kinney to pull this off, Geraci believes that there will be a huge market for a physical diamond ETF.
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