For every investor who wants more Elon Musk, Wall Street increasingly has an ETF. Now it’s planning some for investors who want less.
Upstart issuer Subversive ETFs submitted paperwork to launch a pair of exchange-traded funds that would track the Nasdaq 100 and S&P 500 while excluding companies founded, controlled or led by the world’s richest person. The proposed products — with the tickers QQNE and SPNE — are the latest sign of how quickly the ETF industry is slicing broad market exposure into increasingly specific investment views.
The filings extend a years-long race to package almost every opinion about Musk into a tradable product. Investors can already buy leveraged funds that magnify gains or losses in Tesla Inc., newly launched leveraged funds tied to SpaceX and, up until recently, even had the ELON ETF, which paired a long position in Tesla with a short bet against Ford Motor Co. The latest offerings would let investors own almost the entire benchmark while expressing a specific view on one individual. In effect, they turn a passive index fund into an active opinion about one person.
What began as a business built around low-cost index investing has increasingly evolved into one built around personalization. As demand for niche products has exploded, issuers have rushed to create funds that don’t just track markets but express increasingly specific convictions about individual companies, executives and investment themes.
Whether there is lasting demand for “ex-Elon” portfolios remains to be seen. But the filing underscores a broader reality of today’s ETF boom: if investors can imagine a trade, Wall Street increasingly believes it can wrap it in a ticker.
“Elon Musk is a highly polarizing figure, so it makes sense that an ETF issuer might seek to capitalize on this,” said Nate Geraci, president of NovaDius Wealth Management. “That said, if we’re now in an ETF world where issuers are excluding single companies from major indexes based on investor sentiment toward one man, we may be slicing things a little too thin.”
The products also follow SpaceX’s recent addition to the Nasdaq 100, following its earlier inclusion in the FTSE Russell and MSCI indexes, after a slew of providers altered their own rules about index inclusion to ensure faster entry for mega IPOs. The additions triggered billions of dollars in passive buying and placed the stock in millions of index-tracking portfolios — a milestone celebrated by some investors but criticized by others. S&P Dow Jones Indices, by contrast, declined to fast-track the company into its benchmarks.
Skeptics argue the move forces passive investors to buy into some of the market’s most richly valued companies before the normal price-discovery process has fully played out.
Dave Nadig, president and director of research at ETF.com, said funds built around highly specific investment views can often struggle to develop lasting audiences.
“They may well attract some money that doesn’t think too hard, but these kinds of narrow-cast, micro-ideas aren’t really ‘for’ anyone,” he said of the new filing. “Fun marketing, not a real investment thesis.”
They also come following a record-breaking June that saw some 214 ETF launches, according to data compiled by Eric Balchunas at Bloomberg Intelligence, the most in history. The entire ETFs universe pulled in roughly $191 billion during the month, the second-best monthly haul on record, with over 2,700 funds attracting inflows. Trading volume also approached a near all-time high, reaching about $7 trillion.
The adviser of the funds is banking on the belief that some investors will view Musk-associated companies as having “potential corporate governance concerns, political risks and heightened share-price volatility,” according to the prospectus filed on Wednesday.
“I understand why issuers feel compelled to devise new ways to stand out,” said Jeffrey Ptak of Morningstar. “Investors still ought to be wary, as the product might not serve a legitimate investing purpose or cost an arm and a leg for a very marginal benefit.”
Brilliant! Let’s avoid investing in the most brilliant mind of our generation. I’d go all in on SpaceX and Tesla, thank me later.