BMO & REX Shares’ MicroSectors: Best Alternative ETF Provider – REX Shares is an ETP architect and structurer, who created the MicroSectors brand in 2018 with FNGU & FNGD, 3x/-3x FANG+ ETNs and won Best Alternative ETF Provider in the ETF Express US awards 2019. Scott Acheychek, President of REX Shares, explains they started with Leverage and Inverse but began focusing on beta (1x) versions of their suites due to client demand. The leveraged products (up to 3x) are used actively and with the growth of sector rotational strategies, he believes 1x versions will be active as well.“We look at the world through a trading and structuring lens,” Acheychek says. “The goal of the ETN wrapper is to provide more dedicated sector specific exposures which is quite different from ETFs.”
The current suites FANG+, Big Banks, Big Oil and MLP, are extremely focused.
“Big Banks and Big Oil contain the 10 largest US stocks by market cap in banking and in energy. With FANG+, NYSE has picked the 10 most innovative names in the world with names like FAANG along with Alibaba, Bidu, Tesla, Twitter, and Nvidia,” Acheychek says. “Our MLP product utilises the Dorsey-Wright MLP index. On a monthly basis the index selects the 15 best-performing MLPs.”
In the existing world of leverage and inverse products, Acheychek says there has been a limited amount of innovation. “Investors and traders can come up with trade ideas and execute them through their hand-held devices. We want to provide the best solutions for long or short sector specific products.”
A lot of investors sometimes perceive ETNs to be debt instruments with limited liquidity, but Acheychek comments: “The MicroSectors ETNs have a daily redemption feature which I would argue make it less of a credit risk, it’s not an optional feature like in some structured products. By utilising the some of the largest most liquid stocks the underlying liquidity is really deep.”
Technology is taking a great deal of his attention at the moment as they also recently launched his FANG beta product, FNGS.
“I believe that the technology index world has changed substantially,” Acheychek says. “In the US, two of the largest tech indexes are Nasdaq 100 (related ETF-QQQ) and Tech Select Index (related ETF-XLK). Nasdaq-100 has the one hundred largest companies listed on the Nasdaq. The problem with that is the Nasdaq used to be a primary a technology exchange, but it has now matured so you have a more diverse universe including everyday companies like Starbucks, Pepsi or even the toy company Hasbro.” Additionally, the 2018 GICS classification changes meant technology investing has been transformed, with FAANG companies now listed in three different sectors.
“The Tech Select Index (ETF: XLK) sounds like a straight tech play but includes stocks labelled as Information Technology so you get an allocation to Apple but also top five allocations include MasterCard and Visa,” Acheychek says. “At the end of the day, we want investors to understand what they own and make informed decisions on what to buy or trade. I personally struggle with the idea of a tech allocation that includes soda, coffee or credit card companies.”
Acheychek’s new FNGS ETN offers an alternative to XLK or QQQ and is based on the NYSE FANG+ index with NYSE/ICE having chosen the 10 biggest innovators in world. “We have numerous plans for the future,” Acheychek says. “When you start looking at sector investing, there are lots of areas which can be disrupted.”Scott Acheychek
President, BMO Capital Markets
Scott Acheychek joined REX Shares in 2016 after holding senior sales and leadership positions at several large global investment banks. Scott covered hedge funds, asset managers, and financial advisors for multi-asset and commodity specific solutions. Since 2006, he has worked on the launch of 30+ ETNs and ETFs. Scott has a BSc in Mathematics from Sacred Heart University.
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