This podcast explores the resurrection of failed ETFs and the determination behind making them work. They discuss a list of resurrected ETFs, including target date and luxury goods sector ETFs. They evaluate the investment potential of luxury brands, focusing on Louis Vuitton. They explore the success of the JETS ETF during COVID-19 and the missed gains due to the delayed launch of a boat ETF. A cautionary note is given about investing in VIX-related products.
Failed ETFs are being resurrected and reintroduced, taking advantage of the current ETF market climate and increased comfort with ETFs.
The success or failure of an ETF can be influenced by market timing and maturity, and there are missed opportunities for niche sectors or themes that have the potential to attract investors.
Deep dives
Resurrecting Failed ETFs: The Lazarus List
Some ETFs that were previously deemed failures are being resurrected and reintroduced to the market. One example is the iShares Target Date ETFs, which failed in 2014 but have been brought back with potential success. These ETFs aim to provide a complete portfolio solution by allocating assets across various equity and fixed income holdings, adjusting the allocation as investors approach retirement. While they struggled to gain popularity in the past, the current ETF market climate and increased comfort with ETFs may work in their favor this time. Another example is the Luxury Goods ETF, which has recently resurfaced. This niche sector ETF capitalizes on the strong performance of luxury brands, which have shown resilience even during economic downturns. Though it may have limited appeal, the strong performance of luxury goods may draw investors to consider this overlooked ETF. Additionally, the podcast highlights the Jet ETF, which successfully made a comeback during the COVID-19 pandemic. After previous attempts failed, this airline-focused ETF experienced rapid growth as the travel industry rebounded. Lastly, the discussion touches on the inverse VIX ETF, which collapsed in 2018 but has been reintroduced with slight modifications. This ETF took advantage of volatility in the market, offering a way for investors to profit from short-term futures. Despite its previous demise, the resurgence of interest in volatility-related strategies may present a renewed opportunity for this ETF.
Missteps in the Graveyard: ETFs That Should Have Stayed
While some failed ETFs have found success in their comebacks, others should have been given a second chance but were closed prematurely. One example is the coal-themed ETF, which was discontinued during the rise of ESG investing. With the changing perception of coal in the investment landscape, bringing back a coal-focused ETF could provide investors with a unique exposure. Another missed opportunity mentioned is the fishing ETF, which closed during the financial crisis. Although this ETF's closure was not due to performance issues, its themed focus on fishing created a nostalgic longing for its presence in the market. Lastly, the podcast identifies the short squeeze ETF as a potential resurrection candidate. This ETF would have thrived during the GameStop era, a period characterized by the Reddit-driven short squeeze phenomenon. Despite its potential relevance and utility, the ETF was closed just before the rise of these events. Reflecting on these missed opportunities, the podcast ponders the notion of leaving a movie right before the exciting part and explores the potential for these ETFs to make a comeback in the future.
Lessons Learned: Resurrecting Failed ETFs
The discussion on resurrected ETFs offers valuable insights for investors and issuers in the ETF industry. It emphasizes the importance of considering market timing and maturity when launching new products. The success or failure of an ETF can be heavily influenced by the market climate at the time of its introduction. Some failed ETFs may have been ahead of their time and could thrive in a more mature ETF market. Additionally, the discussion highlights the significance of identifying niche sectors or themes that have the potential to attract investors. Luxury goods, transportation, and volatility-related strategies are examples of overlooked areas that can present unique opportunities for ETF issuers. The podcast also acknowledges the risks associated with certain niche ETFs, such as those tied to the VIX or short squeezes, underscoring the need for cautious consideration and deep understanding of these complex investment strategies. Overall, the podcast provides valuable lessons for both ETF issuers and investors, shedding light on the potential for success and missed opportunities in the world of ETFs.
More than 1,000 ETFs have been liquidated and sent to the proverbial ETF graveyard. But a select few have been resurrected by issuers who think that either the time is right for the idea or they have the ways and means to make it work.
On this episode of Trillions, Eric and Joel speak with Athanasios Psarofagis of Bloomberg Intelligence about his "Lazarus List"—ETFs that have failed, sometimes at inopportune moments, only to later get another chance. The list includes target-date ETFs as well thematic ETFs—which track airlines, shipping and luxury goods—and two exotic offerings.