VettaFi sat down with VanEck’s Head of ETF Product Ed Lopez at the recent Exchange conference. In a changing ETF landscape, VanEck offers standout strategies focused on key themes such as semiconductors. While it continues to emphasize those strategies, the issuer’s thesis statement this year sends a clear message.
“Bonds are back,” Lopez said. “We think that the economy and the markets are going to be somewhat sideways this year, with some uncertainty in terms of what the Fed’s going to do.”
“There’s a great opportunity for investors to get positioned in bonds because of the carry,” he added. “Whichever way it goes, carry can provide a bit of a cushion if volatility comes back.”
The VanEck ETF Roster
The firm’s ETF suite includes five bond ETFs with more than $1 billion in AUM. The largest strategy, the VanEck Fallen Angel High Yield Bond ETF (ANGL), has $3 billion. ANGL tracks the ICE BofA U.S. Fallen Angel High Yield 10% Constrained index for a 35 basis point (bps) fee.
In doing so, it stands out from other high yield bond ETFs in its approach. The ETF seeks bonds that started out investment grade, but then downgraded. ANGL has returned 10.3% over the last one year.
“I’m always excited about ANGL. That’s kind of an all-weather bond strategy,” Lopez said. “If we do end up in a soft landing, you might see some rising stars. Basically, some of these companies get rerated and go back into investment grade, and so you might see some capital appreciation.”
Lopez explained that whether the economy remains robust and the Fed holds rates, or if the Fed cuts rates to boost the economy, ANGL can continue to play a role in portfolios.
Equity ETFs; Beyond Basic Beta
Outside of fixed income, however, Lopez pointed to two different ETFs as strategies for investors to consider. The firm recently joined a group of others in launching a spot bitcoin ETF. VanEck’s take on spot, the VanEck Bitcoin Trust (HODL), tracks the CME CF Benchmarks Bitcoin Reference Rate-New York Variant for a 25 bps fee.
“What we’ve typically told advisors is that the kind of rule of thumb is … the skew that you’ve seen in bitcoin performance can be great,” Lopez explained. “So if you can take … 1% of your portfolio and put it in bitcoin, you can still have the potential for the benefit of bitcoin if it takes off.”
VanEck and the MOAT
Finally, the firm continues to offer the intriguing MOAT ETF. The VanEck Mornignstar Wide Moat ETF (MOAT) tracks the Morningstar Wide Moat Focus Index for a 46 bps fee. The strategy looks for firms with “wide moats” or sustainable competitive advantages as identified in Morningstar’s index. That has helped it return 14.2% over the last five years, more than doubling the return of both its ETF Database Category and FactSet Segment averages.
“It’s buying high quality and buying at a good valuation,” Lopez said. “Even when the S&P 500 was hitting new highs with growth stocks and tech stocks in the Mag Seven — and it was really hard for an active manger to beat that — MOAT has largely because of this methodology.”
Indeed, looking at MOAT compared to the S&P 500 over MOAT’s tenure as an ETF, the strategy has outperformed, per YCharts.
MOAT has outperformed the S&P 500 since inception.
VanEck offers some of the more intriguing strategies for investors this year. Whether it’s ANGL’s bond approach or the firm’s new spot bitcoin ETF, those and other strategies may be worth checking out.
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