Some investors are betting big on Chinese tech despite Cathie Wood’s warning of a ‘valuation reset’

Cathie Wood
Cathie Wood is the CEO and chief investment officer of ARK Invest, which runs three of the highest-returning stock ETFs of the last three years.

  • Cathie Wood is selling shares in Chinese tech companies, but some investors have a different view.
  • The KraneShares CSI China Internet ETF saw record inflows this week, according to Bloomberg.
  • On Tuesday, Wood told investors, “From a valuation point of view, these stocks have come down and again from a valuation point of view, probably will remain down.”
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Cathie Wood is selling off millions of shares in Chinese tech companies, but some investors think she’s got it backwards.

The KraneShares CSI China Internet ETF, worth some $5 billion, saw two days of record inflows this week, according to a new Bloomberg report. This week, more than $631 million has come into the fund, even as others worry China’s regulatory crackdown on ride-hail firm Didi Chuxing could presage future troubles for Chinese tech companies.

“Maybe Cathie Wood’s getting out was the final [contrarian] sentiment indicator those investors needed,” Susquehanna’s Chris Murphy told Bloomberg.

One reason could be that pessimism about China’s regulatory environment is already priced into the country’s tech stocks. All the while, investors have dove headfirst into US tech, leading certain investors to fret that they are overvalued.

“Right now, the momentum-chasing trade has been in the large-cap U.S. tech names. But if it shifts to China tech, watch out,” said Murphy.

The KraneShares ETF’s number one holding, Tencent, has taken a beating recently, falling over 16% in the past six months. Likewise for Alibaba, its number two, down 15% over the same period.

Wood’s Disruptive Innovation ETF has sold one million shares of Tencent since February.

On Tuesday, Wood told investors, “From a valuation point of view, these stocks have come down and again from a valuation point of view, probably will remain down.”

“I do think there’s a valuation reset,” she added.

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Bitcoin and ethereum ETFs pose real risk of harm to markets but could be viable if developed properly, says Australia’s top regulator

A pile of bitcoin cryptocurrencies is seen.
A pile of bitcoin cryptocurrencies is seen.

  • Green-lighting crypto ETFs could risk “real harm” if not properly regulated, Australia’s top financial regulator say.
  • But the Australian Securities and Investments Commission also said that a well-thought-out ETF could be viable.
  • The commission suggested that the existing six asset categories under Australian law don’t accurately capture cryptocurrencies.
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Green-lighting crypto ETFs could risk “real harm to consumers and markets” if not properly regulated, Australia’s top financial regulator said on Tuesday.

Writing in a paper calling for industry comment, the Australian Securities and Investments Commission noted significant consumer demand for crypto ETFs, but warned the products could easily do damage to consumers and markets if poorly designed.

Conversely, ASIC acknowledged that a well-thought-out crypto ETF could be a viable product, subject to the commission’s standards. “At this point in time, in our view, the only crypto-assets that are likely to satisfy these [standards] are bitcoin and ether,” it wrote.

ASIC’s proposed standards included institutional adoption, transparent pricing mechanisms, and a “mature” spot market, echoing some of the SEC’s concerns that the bitcoin market may be subject to manipulation.

The commission suggested that the existing six asset categories under Australian law don’t accurately capture the behavior of cryptocurrencies. It proposed a new category, called “eligible crypto-assets,” that would need new rules and definitions.

ASIC’s difficulty categorizing crypto bears similarity to regulatory struggles in the US, where a patchwork of financial regulators have alternately classified bitcoin as property, a security, and a commodity.

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A new ‘metaverse’ ETF wants to expose investors to the future of the internet

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  • A new “metaverse” ETF is looking to court investors bullish on internet innovation.
  • The fund defines the metaverse broadly as the intersection of many virtual worlds and the physical world.
  • The fund’s biggest holdings include household names like Microsoft and Amazon as well as Nvidia and Roblox.
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A new ETF listed on Wednesday is looking to court investors bullish on internet innovation with exposure to the future of the internet.

The Roundhill Ball Metaverse ETF, debuting today on the New York Stock Exchange, focuses on seven categories – including virtual platforms, cloud computing, and hardware – which collectively comprise the so-called metaverse.

The fund will track the Ball Metaverse Index, developed by the venture capitalist Matthew Ball.

The fund sees the metaverse, defined broadly as the intersection of many virtual worlds with the physical one, as a “quasi-successor state of the internet,” akin to how smartphones reshaped earlier versions of the web. Growth in the metaverse will accelerate as new technologies like VR and blockchain gain mainstream adoption, according to an investor pitch deck.

The fund’s biggest equity holdings include household names like Microsoft and Amazon as well as companies well known to gamers, such as Nvidia, Roblox, and Tencent – which owns the world’s most-watched esport, League of Legends. The Chinese conglomerate also holds a 40% stake in Fortnite-maker Epic Games, which has invested heavily in the metaverse.

Ball has written extensively about the metaverse, arguing in one essay that it could “alter how we allocate and monetize modern resources.” The essay points to “gold farming,” referring to players performing in-game labor for real-world compensation, as an early example. Gold farming has already become commonplace in Venezuela, where some games’ virtual money is more stable than the official bolĂ­var, according to The Economist.

The ETF launched at $15 and was trading up 0.73% at 10:30 a.m. ET.

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Ark Invest’s Cathie Wood welcomed the tumble in tech stocks – and revealed Archegos chief Bill Hwang funded the launch of her ETFs

Cathie Wood
Cathie Wood.

  • Cathie Wood celebrated the tech-stock slump as a chance to score higher returns.
  • The Ark Invest chief said the sell-off reflected a broadening bull market.
  • Wood disclosed that Archegos Capital’s Bill Hwang funded the launch of her ETFs.
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Ark Invest’s Cathie Wood cheered the tumble in tech stocks, and revealed that Archegos Capital’s Bill Hwang was one of her early backers, in a CNBC interview on Friday.

“I love this setup,” the star stock-picker said about the sharp sell-off of Tesla, Shopify, and other holdings in Ark’s exchange-traded funds. “The worst thing that could have happened to us is to have the market narrowly focus on just our ilk of stock – the innovation space.”

Wood also argued that only the prices of her favorite companies have changed, not their prospects. She now expects to score compounded annual returns of 25% to 30% in her funds over the next five years, up from her target of 15% earlier this year.

The Ark chief’s flagship innovation ETF is currently down 12% year-to-date, a sharp reversal from its roughly 150% gain in 2020.

Wood told CNBC about her relationship with Hwang during the interview. The pair of proudly Christian investors met through church and first exchanged ideas in 2013, and Hwang invested in Netflix after Wood recommended the video-streaming stock to him, she said.

“He did provide the seed for our first four ETFs and we’re very grateful to him,” Wood continued, emphasizing that Hwang’s help was crucial as it was tough to secure funding for ETFs in the early 2010s.

She added that she wrote to him after Archegos blew up in March, and doesn’t know whether he’s still an investor in any of Ark’s funds.

Archegos imploded after Hwang’s aggressively leveraged bets on tech and media stocks soured. Several Wall Street banks slapped him with margin calls, declared him in default when he didn’t pay up, and rushed to dump more than $20 billion of his positions in a matter of days.

Credit Suisse and Nomura were among the banks caught out by Archegos’ collapse and the subsequent fire sale, and suffered billions of dollars in losses as a result.

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VanEck files with the SEC for an Ethereum ETF as it waits for the regulator to approve its bitcoin fund

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Ether is the cryptocurrency of the Ethereum network.

  • Asset manager VanEck has filed to list an Ethereum exchange-traded fund.
  • The firm is seeking SEC’s permission to list shares of its VanEck Ethereum Trust.
  • The SEC delayed a decision on whether to greenlight VanEck’s bitcoin ETF until July.
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Asset manager VanEck is seeking US regulatory approval to launch an Ethereum exchange-traded fund, with the move taking place as the company waits for word on whether it will be able to introduce trading of the first bitcoin ETF in the US.

The VanEck Ethereum Trust would list shares on the Cboe BZX Exchange, according to an S-1 filing with the Securities and Exchange Commission on Friday.

The firm said the trust, in aiming to reach its investment objective, will hold ether, the currency native to the Ethereum blockchain network, and value its shares daily based on the reported MVIS CryptoCompare Ethereum Benchmark Rate. Ether is the world’s second-largest cryptocurrency by market capitalization, behind bitcoin.

VanEck and the Cboe are waiting for the SEC to render a decision on whether it can list a bitcoin ETF, which the asset manager applied for in March. The regulator last week delayed a decision until at least July 17, leaving investors waiting on the US to greenlight the country’s first bitcoin ETF.

Wall Street institutions are increasingly embracing or signaling openness to including cryptocurrency into their operations. This week, S&P Dow Jones index announced the launch of three indices tracking the performance of the bitcoin and ethereum – the S&P Bitcoin Index, S&P Ethereum Index, and the S&P Cryptocurrency MegaCap Index.

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An ‘all-stars’ ETF designed to track the stock market’s most popular themes is in the works, new report says

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  • An fund called the Thematic All-Stars ETF is in the works for investors seeking a vehicle designed to track the stock market’s hottest themes.
  • This passively managed fund will be launched by Amplify ETFs, sponsored by Amplify Investments.
  • The fund will not allow a company to make up more than 5% of its overall holdings.
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For investors who want to put their money in the hottest investing themes, a new exchange-traded fund may the answer for you: the Thematic All-Stars ETF.

These thematic segments include disruptive technology, evolving consumer, fintech, health care innovation, industrial revolution, sustainability, among others.

Currently in the works, this passively managed fund will be launched by Amplify ETFs, sponsored by Amplify Investments, which has over $4.7 billion in assets across its suite of ETFs as of March 2021, Bloomberg first reported.

Amplify ETFs filed a prospectus with the US Securities Exchange Commission dated April 28 to launch Amplify Thematic All-Stars ETF.

“The thematic universe includes all ETFs that meet the index provider’s proprietary classification requirements, which are designed to identify ETFs with strategies seeking to capture investment opportunities,” the prospectus said.

But unlike many other funds, the Thematic All-Stars ETF will not allow a company to represent more than 5% of its overall holdings.

Any excess weight will be prorated among remaining constituents, the prospectus said. As of writing, the index contained 160 stocks, which will be reconstituted and rebalanced monthly at the close of the first Friday of each calendar month, the prospectus added.

If approved, the fund will join a list of growing ETFs that have recently debuted to cater to the growing appetite of investors following the GameStop mania driven by Reddit’s Wall Street Bets forum in January.

For instance, an ETF called FOMO, which aims to invest in current or emerging trends, was filed with the US Securities and Exchange Commission in March, intending to alleviate investors’ fears of missing the next big thing.

“With ETF markets booming during the coronavirus pandemic, millennials have also been a key driver to the sector’s growth,” a Finbold report said. “In this case, young people who are not familiar with the operations of the financial markets are well-served by using a passive income management approach, and ETFs offer the solutions.”

The assets under management of the10 largest ETFs surged 47.56% to $1.69 trillion between March 2020 and April 2021. In the past year, these funds added $546.63 billion, according to Finbold.

Read more: Jefferies unveils 14 stocks with exposure to the booming NFT opportunity as digital collectibles continue to become more mainstream despite the recent price slump

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Big-money investors have dumped stocks for 4 straight weeks, even as major indexes hover near record highs

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US stocks have hit record highs in the past weeks – with the S&P 500 breaching 4,000 for the first time – as President Biden’s unprecedented stimulus plan has spurred renewed economic optimism.

Yet Bank of America revealed in a recent note that its institutional clients have been net sellers of shares over the past four weeks.

Communication-services stocks have been at the center of the trend, seeing several weeks of near-record outflows from all BofA client funds as the 10-year Treasury yield has climbed to more than one-year highs. The sector does, however, remain overweighted by actively managed funds.

Only two sectors saw inflows from BofA client portfolios overall: industrials and materials.

Meanwhile, private clients were buyers for the sixth week, though inflows have recently decelerated.

Buybacks by corporate clients have also slowed. The bank did note that the resurgence in buybacks in the first quarter could imply a new record for S&P 500 gross buybacks in 2021.

As for exchange-traded funds, the bank saw big buyers of equity ETFs year-to-date, especially broad market ETFs, which have seen inflows slow down every week for a month.

Growth ETFs saw outflows for the first time in four weeks.

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A Cathie Wood ETF bought about 800,000 shares in a Serena Williams-backed SPAC that just entered a $1.6 billion deal

Cathie Wood
Cathie Wood.


Cathie Wood’s ARK Autonomous Technology & Robotics exchange-traded fund recently bought shares in a special-purpose acquisition company that counts tennis champion Serena Williams as a board member.

The ARKQ ETF snapped up 800,494 shares in Jaws Spitfire Acquisition Corp, according to data available on ARK Invest’s website. The fund counts Tesla, JD.com, Baidu, and Alphabet among its top ten holdings.

Miami-based Jaws is led by chairman Barry Sternlicht and CEO Matthew Walters. The SPAC recently entered a merger deal with digital manufacturing firm Velo3D to take it public, valuing the combined company at $1.6 billion.

Wood and the red-hot SPAC market have been caught up in a bit of a rough patch. Blank-check companies have already raised $96 billion across 296 IPOs so far in 2021, according to SPACInsider.com. Blank-check stocks tumbled on Thursday after Reuters reported the Securities and Exchange Commission has begun an inquiry into Wall Street’s SPAC frenzy and seeking voluntary information on dealings.

But 93% of SPACs that went public this week are trading below their $10 IPO price, Dealogic data compiled by Reuters showed. That is 14 out of 15 SPACs trading below par value.

Wood is known for her innovative investments in disruptive stocks. But her flagship $22.9 billion Innovation ETF is currently sitting on a 8% year-to-date loss after a broader pullback in high-growth stocks across multiple sectors. Meanwhile, the ARKQ ETF that bought into Jaws is up 4.6% year-to-date.

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Investors pull $15 billion from bond funds as rising yields contribute to the biggest weekly outflows in a year

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Rising yields have led to bond-fund outflows.

  • Weekly outflows from bond funds hit $15 billion, the highest amount in about a year, says tracker EPFR.
  • Rising Treasury yields have spurred flight from bond funds while bolstering equity funds.
  • The 10-year Treasury yield spiked beyond 1.6% on Friday.
  • See more stories on Insider’s business page.

A climb in long-dated Treasury yields stoked by US growth expectations has contributed to investors yanking more than $15 billion from bond funds this week, the largest outflow in a year, according to figures released Friday.

Borrowing costs are stepping higher as implied by the 10-year Treasury yield which is tied to a range of loan programs. The pickup in borrowing costs has put pressure on equities, particularly highly valued tech stocks, in recent sessions including on Friday. The 10-year yield was pushed up to 1.639%, its highest in more than a year and the Nasdaq Composite dropped 1.5%.

Yields have increased as investors price in a potential rise in inflation as the US economy recovers from the impact of the COVID-19 pandemic that threw it and other economies into recession last year.

Concerns about US bond yields was a factor in chasing more than $15 billion from bond funds during the week ended March 10, said EPFR, a subsidiary of Informa that provides data on fund flows and asset allocation. The latest outflow was the largest in nearly a year, it said in a note Friday. Bank of America, meanwhile, tallied bond outflows of $15.4 billion.

This week’s bond auctions included the sale of $38 billion in 10-year Treasuries. This week also marked the signing by President Joe Biden of a massive fiscal package under which $1,400 checks will be sent to most Americans.

“While the specter of another wave of US Treasuries hitting the market contributed to the growing angst about global borrowing costs,” wrote Cameron Brandt, director of research at EPFR, “the $1.9 trillion worth of stimulus they will be issued to finance added fresh fuel to the global reflation narrative.”

He said that narrative has “lit a fire” under equity flows. Equity funds tracked by EPFR raked in more than $20 billion for a fifth straight week. That keeps stock-fund inflows on track for a new quarterly record as year-to-date flows “moved within striking distance of the $240 billion mark,” said Brandt.

Brandt also said weekly bond outflows were spurred by the liquidation of funds linked to Greensill Capital, a UK-based supply chain finance company that filed for bankruptcy protection earlier this week.

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The world’s biggest crypto fund manager is hiring 9 ETF-related specialists, in anticipation of approval of the first US crypto ETF

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Michael Sonnenshein, managing director of Grayscale Investments.

  • Grayscale Investments is hiring an ETF team, in a sign it expects the US to approve crypto exchange-traded funds.
  • The digital asset manager doesn’t currently have an active filing with the SEC for a crypto-related ETF.
  • Canada has already approved three cryptocurrency ETFs that trade on the Toronto stock exchange.
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Grayscale Investments, the largest digital currency asset manager, has posted nine ETF-related job ads on LinkedIn, in a sign it expects the Securities and Exchange Commission to approve the first US crypto ETF.

Crypto ETFs have been hotly debated in the US ever since the Winklevoss twins’ filing of their bitcoin ETF with the SEC was rejected in 2017. The SEC has so far been arguing that the crypto market is too volatile, lacks sufficient surveillance, and is easily manipulated.

The US regulator is now considering ETF applications from WisdomTree, NYDIG, VanEck, and Valkyrie Digital Assets. Grayscale has filed to launch an ETF in the past, but it does not currently have an active filing with the SEC for a bitcoin, or crypto-related ETF. However, it could push its $35 billion Bitcoin Trust, the largest of its kind, into an ETF.

“We’re not able to provide further detail aside from the fact that we are continuously exploring new opportunities, such as an ETF, in response to customer demand,” Michael Sonnenshein, Grayscale’s CEO and managing director, told Bloomberg. “We were the first to provide exposure to a digital asset through a regulated wrapper, and our goal is to ensure that we lead the market in whatever future product we bring forward as well.”

Grayscale’s new roles require between three and five years experience in financial positions involving exchange-traded funds. The job postings as seen on LinkedIn currently include an ETF market-maker relationship manager, an ETF finance reporting manager, ETF finance support manager, ETF creation and redemption specialist, ETF authorized participant relationship manager, ETF product development specialist, a compliance officer, and two sales director positions.

Regulated ETFs aren’t too far away, as Canada approved three publicly-traded bitcoin ETFs within the last month that trade on the Toronto Stock Exchange.

Ark Invest’s Cathie Wood told CNBC in February she expects the US to greenlight a bitcoin ETF, as she’s confident in President Joe Biden’s pick for SEC chairman, Gary Gensler, who is seen as a positive for cryptocurrencies. The Senate banking committee on Thursday voted in favour of sending Gensler‘s nomination to the floor for confirmation.

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