Investments Roundup: VanEck, Cetera, Morningstar, BlackRock, CAIS And More

Q&A With Matthew Sigel Of VanEck – Our Investments Solutions Leader Of The Month – And Product News Featuring Cetera, Morningstar, BlackRock, CAIS, Envestnet, MMI, Simplify, Eaglebrook, Cerulli And HFR.
Matthew Sigel, Head of Digital Assets Research, VanEck
Matthew Sigel, Head of Digital Assets Research, VanEck
Chris Latham, Managing Editor, Wealth Solutions Report
Chris Latham, Managing Editor, Wealth Solutions Report

In this edition of the Investments Roundup, we speak with our newest Investment Solutions Leader of the Month, Matthew Sigel, Head of Digital Assets Research at VanEck, who discusses cryptocurrency and the firm’s spot bitcoin ETF fund.

Other entries this month include Cetera introducing a policy on bitcoin ETFs, Orion partnering with CAIS on alts, the Morningstar Investment Conference giving advisors free passes, the Money Management Institute partnering with NYU Stern, Eaglebrook partnering with Geneos Wealth on crypto SMAs, Simplify Asset Management launching an India ETF, Independent Financial Group putting model portfolios on Envestnet’s platform, BlackRock expanding its SMA access by acquiring SpiderRock, Cerulli noting a mild mutual fund dip in January and HFR noting a major hedge fund surge in February.

Larry’s Take

Larry Roth, CEO, Wealth Solutions Report
Larry Roth, CEO, Wealth Solutions Report

Famed J.P. Morgan CEO Jamie Dimon has begun to soften his ardently anti-cryptocurrency stance. So have some very intelligent people in the wealth management industry whom I respect. Which is why, at this point, when clients ask advisors about allocating assets to bitcoin ETFs, simply saying “crypto is a scam” or “crypto is too risky” may be unconvincing to many next-gen investors and next-gen advisor recruits.

Now is the time for advisors and their firms to learn about ways to provide access to the asset class while remaining on the right side of regulators. Industry conferences in 2024 inevitably will have sessions dedicated to the topic. Instead of reinventing the wheel, it may be worth partnering with asset management and wealthtech platforms that have been building out the requisite capabilities for the past few years.

In the not too distant future, it may even become possible that RIAs and independent broker-dealers with disciplined crypto offerings could fetch higher valuations when pursuing M&A deals than rivals that choose to avoid this particular type of financial innovation.

If you would like to discuss this Larry’s Take further, including how these trends might impact your business, please contact me at larry.roth@rlrstrategicpartners.com.

1. VanEck Discusses Its Bitcoin ETF, And What’s Fueled The Crypto Surge

In January, VanEck launched the VanEck Bitcoin Trust, an ETF that provides spot bitcoin exposure under the ticker HODL, which priced with an expense ratio of 0.25%. VanEck was the first established ETF issuer to file for a futures-based bitcoin ETF in 2017, and filed for a spot bitcoin ETF in 2018. As of March 14, the ETF had a performance of 57.32%. Several other firms, from BlackRock to Fidelity, also launched bitcoin products.

And now for our Q&A with Matthew Sigel, Head of Digital Assets Research at VanEck.

WSR: Why did VanEck decide to pursue bitcoin ETF strategies? What led the firm to have conviction in the asset class?

Sigel: VanEck’s legacy of identifying opportunities in emerging markets and unconventional assets like gold mining shares led us to embrace the innovators’ dilemma that digital assets like bitcoin presents. Amid concerns over endless government budget deficits and increasing financial repression, we see bitcoin and other crypto assets as viable diversification tools, increasingly attractive to the youth in developing and frontier countries with unattractive fiat alternatives.

WSR: Why did bitcoin recently surge to a new all-time high in early March?

Matthew Sigel, Head of Digital Assets Research, VanEck
Matthew Sigel, Head of Digital Assets Research, VanEck

Sigel: The new U.S. spot bitcoin ETFs have bought more than five times new bitcoin supply since their Jan. 10 launch and more than 10 times new supply in the last week of February. Even Marathon, the largest publicly traded U.S. miner, announced in an earnings call that the company bought the ETF with spare cash on a dip. The ETF wrapper, akin to an API connection from TradFi [traditional finance] to bitcoin, makes it much easier to purchase and custody the asset in an affordable and compliant fashion.

Among new entrants to the space in the last month, Reddit announced it had bought bitcoin and ethereum for its balance sheet in an IPO filing, Ethiopia revealed its state-sponsored foray into bitcoin mining, and Merrill Lynch and Wells Fargo rolled out access to the bitcoin ETFs to select wealth management clients with brokerage accounts.

WSR: What is your forecast for where bitcoin, and cryptocurrency in general as an asset class, are headed in 2024?

Sigel: We stay aggressively positioned to capitalize on the historic four-year pattern for bitcoin, which suggests the most significant gains during the halving year and subsequent 12 months. Our medium-term price target for BTC is $325,000, half the market cap of gold, which also corresponds to the minimum trough-to-peak cycle for the asset, which was 16x in 2020 to 2021.

There is evidence that the 2020 cycle was abbreviated due to the bankruptcy of major centralized lenders like 3AC and BlockFi. That deleveraging cycle was, ironically, partially caused by persistent discounts of OTC-traded bitcoin trusts because of regulatory uncertainty – the very issue which ETFs alleviate.

2. Cetera Introduces Bitcoin ETF Policy And Guidance In Brokerage Accounts

Matt Fries, Head of Investment Products and Partner Solutions, Cetera
Matt Fries, Head of Investment Products and Partner Solutions, Cetera

Cetera Financial Group is one of the first major wealth management firms to introduce a policy regarding the usage of bitcoin ETFs in brokerage accounts. It addresses education and resources designed to help affiliated financial professionals work with their clients in adding bitcoin ETFs into investment portfolios.

The firm has approved usage of Invesco Galaxy Bitcoin ETF (BTCO), Franklin Bitcoin ETF (EZBC), Fidelity Wise Origin Bitcoin Fund (FBTC) and Blackrock iShares Bitcoin Trust (IBIT). Cetera will make training available for financial professionals on its AdviceWorks portal starting March 25.

“As expected, we are prudently embracing bitcoin ETFs and we prioritized developing this important guidance to help our financial professionals implement these products in client portfolios,” said Matt Fries, Head of Investment Products and Partner Solutions at Cetera. “We will continue to proactively evaluate the implications of bitcoin ETFs and related products and modify our policies accordingly, and we look forward to partnering with our financial professionals to adopt bitcoin ETFs when appropriate with their clients.”

3. Orion Partners With CAIS On Alts For Advisors, Hosts Annual Ascent Conference

Natalie Wolfsen, CEO, Orion
Natalie Wolfsen, CEO, Orion

Orion partnered with the alternative investment platform CAIS to provide Orion’s Wealth Advisory and OCIO clients access to alternative investment funds and products, diversify client portfolios and deepen client relationships. This includes private equity, private debt, private real estate and hedge funds.

Advisors on Orion’s platform will experience streamlined trading workflows, end-to-end digitized transaction processing and integrations with custodians. Orion Advisor Academy will feature “Fundamentals of Alternatives” from CAIS IQ, CAIS’ proprietary education platform offered to advisors at no cost. Orion also held its annual Orion Ascent Conference from March 12 to March 15 in San Diego.

“We’re excited to integrate with CAIS to provide access to alternative investment strategies from leading asset managers,” said Natalie Wolfsen, CEO of Orion. “CAIS is aligned with Orion’s commitment to supporting the independent advisor community, given their industry-leading technology, broad selection of funds, robust online educational platform, deep technology integrations and independent due diligence relationship with Mercer.”

4. Morningstar Investment Conference Offers Free ‘Hosted Advisor’ Passes

Kunal Kapoor, CEO, Morningstar
Kunal Kapoor, CEO, Morningstar

After 17 years at McCormick Place, the 36th annual Morningstar Investment Conference will occur June 26 and June 27 at Navy Pier, which is among the most visited tourist attractions in Chicago. Also for the first time, Morningstar is offering a limited number of Hosted Advisor passes that allow registered investment advisors to attend the conference for free.

Geopolitical strategist Ian Bremmer, President and Founder of Eurasia Group, will serve as a keynote speaker. Morningstar CEO Kunal Kapoor will moderate a panel with Hightower CEO Bob Oros and TCW Group CEO Katie Koch. Other speakers include Kevin Franklin, Managing Director and Portfolio Manager at BlackRock; Zack Kass, former Head of Go-to-Market at OpenAI; and Michael Kitces, industry speaker, financial planner and Co-Founder of AdvicePay.

“We are reimagining our conference this year to coincide with Morningstar’s 40th anniversary,” Kapoor said. “The event is coming to Chicago’s iconic Navy Pier, introducing new connections for advisors and sponsors, and featuring a standout agenda of the industry’s most thoughtful and contrarian thinkers so advisors can keep pace with today’s evolving investor.”

5. Money Management Institute Partners With NYU On Graduate-Level Program

Tim Williams, Director of Education Initiatives, Money Management Institute
Tim Williams, Director of Education Initiatives, Money Management Institute

The Money Management Institute (MMI) has teamed up with NYU Stern Executive Education to launch Academy, a three-week development program for investment professionals in the early stages of their career. The program, which begins in April, is for people who’ve worked in the industry for five years or less.

Individuals who are accepted into the program will complete an online graduate-level curriculum, participate in experiential workshops at industry firms and attend an in-person residency at NYU Stern School of Business. Completing the hybrid experience can provide participants with NYU Stern Executive Education co-branded certificates, greater expertise and an expanded professional network.

“Investing in professional development opportunities for employees is critical for firms to survive and thrive in today’s world,” said Tim Williams, Director of Education Initiatives at MMI. “Firms in the investment management industry can now rely on MMI to provide all levels of their organization with timely education, necessary upskilling and invaluable networking opportunities.”

6. Eaglebrook Partners With Geneos Wealth On Crypto SMAs For Advisors

Chris King, Founder and CEO, Eaglebrook
Chris King, Founder and CEO, Eaglebrook

Eaglebrook, a crypto investment platform that provides RIAs with direct access to digital assets including bitcoin and ethereum, added its crypto separately managed accounts (SMAs) to the RIA investment platform of Geneos Wealth Management, a Denver-based hybrid RIA overseeing more than $10 billion in assets. Geneos advisors can offer clients direct ownership of digital assets that are held at a qualified custodian with institutional-grade security.

The advisors also can automate tax-loss harvesting and create diversified, multi-asset portfolios. Eaglebrook’s digital asset strategies integrate with Geneos’ portfolio management systems to streamline client onboarding, trade execution and rebalancing. Eaglebrook has a network of more than 700 financial advisors and approximately $210 million in assets under management (AUM).

“The era when advisors could overlook digital assets and proceed without a plan is coming to an end,” said Chris King, Founder and CEO of Eaglebrook. “This partnership validates Eaglebrook’s innovative approach and highlights the opportunity for digital assets now and in the future.”

7. Simplify Launches India ETF In Partnership With System Two Advisors

Fiona Ho, COO, Simplify
Fiona Ho, COO, Simplify

Simplify Asset Management partnered with System Two Advisors to launch the Simplify Tara India Opportunities ETF (IOPP), an actively managed fund that factors in India’s GDP, demographics, digitization and manufacturing. IOPP is Simplify’s first international ETF. Anupam Ghose, Managing Partner at System Two Advisors, previously worked at Goldman Sachs and Credit Suisse.

System Two Advisors applies bottom-up research that evaluates companies on their business moat, growth drivers, management quality and growth potential. The firm has 70 on-the-ground in-market personnel across India, and a portfolio of 25 to 40 holdings. In November, Simplify launched the Simplify MBS ETF (MTBA), which invests in mortgage-backed securities and focuses on providing exposure to MBS issued in 2023.

“We’re thrilled to be bringing IOPP to market and can think of no better firm with which to partner than System Two Advisors,” said Fiona Ho, Chief Operating Officer at Simplify. “Their on-the-ground knowledge of the unique aspects of the Indian economy and India growth story, combined with our expertise in building and running innovative ETFs, make this a powerful combination and one we’re eager to discuss with investors and advisors.”

8. IFG Expands Advisor Access To Envestnet Solutions, Model Portfolios

James Naldi, Director of Research and Portfolio Construction, IFG
James Naldi, Director of Research and Portfolio Construction, IFG

Envestnet and San Diego-based independent broker-dealer Independent Financial Group enhanced their ongoing partnership by giving IFG’s network of more than 600 independent financial professionals increased access to Envestnet’s wealth management solutions.

IFG also implemented the Envestnet Credit Exchange, powered by the Advisor Credit Exchange (ACE), giving IFG’s affiliated professionals access to banking and lending solution providers. In addition, IFG is launching a series of 14 home office model portfolios on the Envestnet platform.

“These models offer an institutional caliber portfolio construction process that integrates the potential benefits of both active and passive investing into a set of highly diversified investment portfolios,” said James Naldi, Director of Research and Portfolio Construction at IFG. “What’s great about these models is that they allow the advisor to retain the level of discretion and control in the investment management process that best suits their unique preferences.”

9. BlackRock Agrees To Acquire SpiderRock Advisors, Expanding SMA Access

Eric Metz, President and CIO, SpiderRock Advisors
Eric Metz, President and CIO, SpiderRock Advisors

BlackRock agreed to acquire the remaining equity interest in SpiderRock Advisors (SRA), which provides customized option overlay strategies for wealth managers. The deal expands on the minority investment BlackRock made in SRA in 2021 and enhances BlackRock’s personalized SMA offering. Chicago-based SRA managed approximately $4.8 billion in client assets as of February.

Its SMA strategies focus on income and risk management for single securities and diversified portfolios using derivative overlay strategies. RIAs, family offices, broker-dealers and institutional channels have access to them. BlackRock managed $186 billion in SMAs as of December. Its SMA franchise specializes in providing customized strategies, including Aperio’s direct indexing capability, actively managed fixed income, equity and multi-asset strategies.

“We are thrilled to fully join the BlackRock team, and to broaden access to SpiderRock Advisors’ options management solutions for both taxable and tax-exempt investors,” said Eric Metz, President and Chief Investment Officer of SpiderRock Advisors. “Innovative advisors and investors understand the value of options in their portfolios to better manage risk as we navigate a challenging capital markets landscape.”

10. Cerulli Finds Mutual Funds Dip, ETFs Rise As Advisors Seek Service Enhancements

Kurt Cerulli, CEO, Cerulli Associates
Kurt Cerulli, CEO, Cerulli Associates

Cerulli Associates released its latest edition of The Cerulli Edge—U.S. Monthly Product Trends, which analyzes data as of January for mutual funds and ETFs. The report found that

mutual fund assets decreased a mere $10 billion to $18.5 trillion on outflows and market performance, as ETF assets grew 0.6%.

Active ETFs had $20.9 billion in flows and passive ETFs had $22.7 billion. Commodities ETFs lost 2.5% and allocation ETFs lost 2.3% of assets due to flows. Meanwhile, economic, monetary, and political uncertainty – along with greater emphasis on tax awareness and ESG considerations – are prompting high net worth wealth management firms to seek platform enhancements, Cerulli found.

“Integrating customization and optimization tools (e.g., direct indexing) into wealth managers’ standard asset allocation service offerings is increasing firms’ ability to provide their clients additional value,” according to the report. “Implementing more bespoke investment solutions and private market investment access to clients at scale increasingly requires intermediaries have a robust account aggregation and performance reporting ecosystem.”

11. HFR: Technology, AI And Crypto Lead Broad Hedge Fund Gains In February

Kenneth Heinz, President, HFR
Kenneth Heinz, President, HFR

HFR reported that hedge funds experienced widespread gains in February, with technology, AI and cryptocurrency exposures leading the way across all strategies and taking the HFRI Fund Weighted Composite Index’s (FWC) four-month return to 8.75%, the strongest since the four-month period ending March 2021. The FWC increased an estimated 2.5% in February alone.

Also for the month, the HFR Cryptocurrency Index rose 31.2%, the HFRI EH: Sector-Technology Index rose 6.0%, the HFRI Macro: Systematic Diversified Index rose 4.8%, the HFRI EH: Fundamental Growth Index rose 4.53%, the HFRI ED: Activist Index rose 4.3% and the HFRI Equity Hedge (Total) Index rose 3.2%.

“Hedge funds surged across a broad range of strategies in February as a combination of an improving outlook for economic growth, expectations for interest rate decreases and other technical factors drove strong gains across global equity and cryptocurrency markets, with hedge fund performance led by Equity, Macro and Cryptocurrency exposures,” said Kenneth Heinz, President of HFR.

Chris Latham, Managing Editor at Wealth Solutions Report, can be reached at clatham@wealthsolutionsreport.com

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