Van Eck Associates Corp. is the eighth-largest exchange-traded fund sponsor with $36 billion in assets, according to XTF.com. The New York City-based company’s products are designed to target specific investment mandates that complement the cheap, core beta products that dominate many investor portfolios. One of its more interesting products is still under wraps. Last year the company joined with SolidX Partners Inc., a fintech outfit, to file with the Securities and Exchange Commission for an ETF that will hold actual bitcoin, and will be insured against loss or theft of the cryptocurrency. That product, like all prior and subsequent bitcoin-related ETF filings, hasn’t been approved for trading by the SEC.
Financial Advisor recently spoke with Jan van Eck, CEO of Van Eck Associates, to talk about the prospects for bitcoin-related ETFs, as well as other aspects regarding his company’s ETF product line.
FA: I’m sure you’re proud of all of the VanEck ETFs, but are there any funds that you’re particularly proud of in terms of the role they play in investment portfolios?
van Eck: [Long pause] I think there are probably two, but every fund has got its own niche. But two that come to mind are our fallen angel [VanEck Vectors Fallen Angel High Yield Bond ETF, ticker ANGL] and our wide moat [VanEck Vectors Morningstar Wide Moat ETF, ticker MOAT] strategies. The fallen angels worked really well in 2016 when energy bonds came into the index after energy prices went way down, and it outperformed. It’s nice to see when you have a theory and it actually plays out—in this case, something that becomes a good way to generate good returns and high yield.
For fallen angels to work you need one sector to really be in pain, because when a sector is in pain the bonds come into the index.
FA: So 2019 might not be a great time for this ETF?
van Eck: What’s good about this strategy is that it’s fine in regular times, but it really shines when you have a sector coming into it.
The second fund to spotlight is the wide moat ETF. What I like about it is you want to invest in companies with defensible profit streams. But what’s unsung about it is that Morningstar has a team of 100 equity research analysts who analyze stocks, and they’re forward looking. It’s not an exact science to project a company’s profits during the next 20 years, but that’s where they’re applying their energy by trying to find what that will look like. Most of the statistics that look at stocks are either current or backward looking, and this is something that’s forward looking. And that strategy has continued to work.
Last year it essentially kept pace with the S&P 500 even though it was about 20 percent underweight technology. So even though the FANG stocks were ripping, it kind of hung in there. And when everything fell apart in the fourth quarter MOAT ended up outperforming the S&P by three percentage points on the year. I love how that fund works.
FA: Let’s talk about bitcoin. I know you’re personally big on bitcoin, and VanEck has a bitcoin ETF in registration. Do you think that bitcoin will eventually be approved by the SEC?