With more than 3,000 ETFs available in the U.S in an industry about to turn 30 years old., it might seem like there is no room for innovation. However, a relatively new ETF provider, AXS Investments, has launched many firsts in the last few years and is likely to continue to do so. VettaFi recently connected with Greg Bassuk, CEO of AXS Investments, to learn about the fund’s lineup and what’s to come. We discussed the AXS TSLA Bear Daily ETF (TSLQ), one of the firm’s single stock ETFs, as well as the AXS Short Innovation Daily ETF (SARK), the AXS 2X Innovation ETF (TARK), and the AXS Astoria Inflation Sensitive ETF (PPI).
VettaFi: AXS Investments has offered mutual funds for years but only recently entered the ETF market. What makes the ETF industry a place where innovative ideas can be successful?
Bassuk: The AXS management team were early pioneers in the ETF space, and game-changing ETF innovation has always been our focus. Since founding IndexIQ in 2006 to bring the first-ever family of Alternative ETFs to the market, we haven’t stopped innovating since. AXS (pronounced “Access”) believes the ETF space is still in the “early innings” and ripe for a new wave of innovation, particularly given the many ways in which ETFs enable new and improved “access” for individuals to unique and important investment exposures previously unavailable to the broader investing public.
VettaFi: AXS was the first firm to launch single stock bull and bear ETFs in 2022 with products like TLSQ. How has demand been for single stock ETFs, and what are some of the use cases you are aware of?
Bassuk: The AXS launch of the first-ever single stock Bull and Bear ETFs in the U.S. was right in line with many other first-of-their-kind strategies that AXS has brought to market. We’ve been pleased with investor demand and uptake of these funds. For example, TSLQ quickly amassed over $50 million in AUM with a very strong average daily trading volume since inception.
There are several use cases for traders who seek to invest in their high conviction, short-term views (positive or negative) of a single stock. For example, when a company like Tesla, Nvidia, PayPal, or others announces earnings or is impacted by other major newsworthy events, these ETFs enable that investment access. These ETFs also solve some of the limitations of traditional margin investing; namely, that margin traders can lose more than their initial investment if their trade goes wrong and they need to post more money, whereas, with single-stock ETFs, investors cannot lose more than their investment. Moreover, margin trading is not permitted in many types of investor accounts, whereas single-stock ETFs enable access in those accounts for traders desiring to express their high conviction short term views.
VettaFi: You also offer bull and bear strategies tied to the prominent actively managed ARKK ETF, with SARK and TARK. Can you talk about how these funds work and why you think SARK has been the more popular of the two?
Bassuk: These ETFs represent another “industry first” for AXS. Specifically, these were the first-ever ETFs based on other single underlying ETFs. The investment rationale for these ETFs goes back to our core philosophy of enabling better investor “access” – in this case, they allow investors to express a Bullish view with TARK or a Bearish view through SARK on Disruptive Technology stocks.
We believe SARK and TARK are equally popular in that SARK was launched six months earlier than TARK and at a time when investors were increasingly bearish on Disruptive Technology stocks, amassing about $500 million in AUM in a very short amount of time. And we see similar interest in TARK during the recent periods when investors sought short-term higher conviction in Tesla.
VettaFi: The AXS lineup of ETFs also includes some potential core equity ETFs like PPI. How does this fund seek to benefit from the high inflationary times?
Bassuk: PPI is also another industry first. While investors historically allocated to single-exposures for inflation protection, such as TIPS or commodities, PPI is a “single-ticker allocation” to a range of inflation-protection exposures, such as commodities and TIPS, while simultaneously allocating to stocks that tend to perform well in inflationary environments, such as cyclical stocks.
PPI was a highly successful ETF launch, amassing $50 million in AUM in about 50 trading days, was named the 2022 ETF Newcomer of the Year by With Intelligence, and has ranked in the Top 5% in its Morningstar category since inception.
VettaFi: In the short time, AXS has rapidly expanded its lineup. What should advisors look for as we head into 2023?
Bassuk: AXS continues to execute successfully on its mission and focus on building the industry’s only “pure-play” platform providing ACCESS to alternatives to traditional stock and bond investing. Looking ahead to 2023, we have a very aggressive pipeline of acquisitions, partnerships, and new products that will continue to drive innovation in the ETF space at a magnitude the industry has not seen historically.
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