Page 44 - Investment Advisor October 2022

ETF ADVISOR

ETFs are gaining significant attention,
they’re not for the average retail inves- That hunt for income, we’ve seen it in
tor and have attracted only $80 million
combined, according to Nadig. There dividend strategies, we’ve seen it in
eventually could be thousands more sin- munis, we’ve seen it in high-yield bonds,
gle-stock ETFs, with the potential for
multiple funds for every stock, he said. [and we’ve seen it in real estate ETFs].
“They’re an interesting expansion of
the toolkit for very active traders,” he —Dave Nadig
said. Nadig expressed concern, how-
ever, that single-stock ETFs will be
used by people who don’t understand Single-stock ETFs suffer from “the ple, the inverse swap counterparty
them and said they’re not suitable for most non-intuitive math in the market,” moves cash into a custodial settlement
long-term investors. “They are truly Vetta Fi’s Nadig said, explaining they account for the Tesla ETF. If Tesla
daily trading vehicles.” may bear little relation to the underlying stock rises, the fund moves money into
Single-stock ETFs use derivatives to stock’s actual movement if held for more the bank’s account. “It’s a bar bet that’s
generate leveraged or inverse returns than a day. settled every night and put on again in
on individual stocks, Morningstar These ETFs use swaps to generate the morning,” he said.
explained recently, strongly urging aver- daily exposure, negotiating with a bank
age investors to avoid these “extremely for a daily settled swap, he explained. Staff reporter Dinah Wisenberg Brin can be
risky” investments. If Tesla shares move down, for exam- reached at [email protected].

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42 INVESTMENT ADVISOR OCTOBER 2022 | ThinkAdvisor.com