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Fund firms are rushing to launch products tracking cryptocurrencies, memecoins and digital artwork, betting that retail investor appetite for risky assets will extend to some of the most speculative corners of the investment world.
Exchange traded funds tracking the performance of smaller cryptocurrencies such as cardano and litecoin, memecoins including dogecoin and $TRUMP, companies investing in “reverse-engineered” alien technology and Pudgy Penguins non-fungible tokens are among recent filings made by fund providers.
The flood of proposed ETFs hints at “a desperation on Wall Street” to offer retail investors new products, said Bill Singer, a lawyer and former regulatory attorney at the American Stock Exchange.
“What these new ETFs also show us is that the public is bored. They want brand new, exotic instruments to trade.
“In the US, you have the right to walk into a casino and put your life savings on red or black, for better or worse. Under the Trump administration, the movement is to let people fail or succeed, and they’re not going to stop you.”
Many of the filings target the market for digital assets, buoyed by the appointment of President Donald Trump’s nominee Paul Atkins as chair of the US Securities and Exchange Commission. Atkins is widely viewed as more friendly to crypto than predecessor Gary Gensler.
This week Trump Media & Technology Group, the Trump family media company, filed an application to launch a Truth Social bitcoin ETF.
The regulator recently permitted the launch of ETFs tied to futures contracts for two cryptocurrencies, solana and XRP, in addition to existing bitcoin and ether funds. Asset managers have also filed a swath of applications with the SEC for funds holding other cryptos, such as cardano and litecoin. Basket products holding a range of currencies are also in the offing.
In January, three asset managers filed to launch ETFs that would hold memecoins — tokens representing online viral moments but with no fundamental value or use case — such as dogecoin and $TRUMP.
Tennessee-based Canary Capital has filed for a Pengu ETF that would hold the tokens and NFTs of internet brand the Pudgy Penguins project. If approved, the launch would mark the first time that ETFs have held assets that are non-fungible, unlike the fully interchangeable stocks, bonds and even cryptocurrencies that currently underpin portfolios.
Earlier this year Tuttle Capital Management filed for a UFO Disclosure AI Powered ETF. This would invest in aerospace and defence contractors that have “potential exposure to advanced or reverse-engineered alien technology, spurred by government disclosures about UFOs” and “materials and energy firms that could benefit from new energy sources or metamaterials inspired by alien technology”.
“There is something about the American go get ‘em, anything is possible spirit which seems to sit more comfortably with some of these more adventurous investment propositions,” said Kenneth Lamont, principal of research at Morningstar.
“In some ways it should be taken as a celebration of what an ETF is. It’s a market access vehicle. If you are talking about the democratisation of finance and the ability of investors to track what they want to track that should be celebrated.”
But some are more sceptical of the new areas into which the ETF industry is moving.
“For now, animal spirits are throwing a rave, with seasoned, sophisticated investors amusedly spectating from a distance,” said Victor Haghani, founder and CIO of wealth manager Elm Wealth. “For the revellers, that should tell them all they need to know.”
Others doubt there is sufficient investor appetite for so many products investing in such speculative assets.
Todd Rosenbluth, head of research at consultancy TMX VettaFi, said these ever more unusual filings were happening even as the $608bn Vanguard S&P 500 ETF, the world’s largest, is on track to surpass its own record for full-year inflows for an ETF.
This suggested that “product development is often further ahead of what the investor base has interest in”, he said.
“Some of these products will have a very short life. There is a risk of people buying something that is greater risk than they appreciate, they get hurt and it puts ETFs in a bad light.”
