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A lot of financial innovation benefits the creator more than the user. ETFs are an exception to the rule. Great products are a win/win for both the issuer and the investor.
The ETF landscape has evolved over time. First there were plain vanilla ones that track the major indexes. Then came commodities, smart beta/factors, ESG, and, most recently, an explosion in active strategies.
These active ETFs take many different forms from ones that use leverage to enhance upside and downside, to ones that use options to either generate income or put guardrails on to offer downside protection. A new one is about to hit the market that I think has the potential to catch a lot of attention, especially from financial advisors.
My friend Meb Faber, co-founder and CIO of the multi-billion dollar shop Cambria Advisors, is about to launch an ETF (TAX) that allows investors to seed the ETF with existing securities.
Why would somebody do this? Let’s say you’ve got a bunch of stocks that you’ve done really well with and want to sell, but are not too psyched about the tax boogeyman. The existing options for diversifying out of them without paying taxes aren’t great. Enter TAX. With this ETF, you can exchange securities for shares in a diversified basket of stocks that Meb and his team manage. To be very clear, this is not a tax arbitrage. Your cost basis follows you into the fund. But this is a diversification play.
I recently sat with Meb to talk through the strategy on The Unlock, a new thing we’re doing that’s distinct from what we’re doing with most of our content. Unlike Animal Spirits or TCAF, which is for a general audience, The Unlock will be programmed specifically for financial advisors and people in the wealth management industry. We’re going to be talking about wealth tech, practice management, and trends in the industry. We’re excited to ramp it up in 2025. You can sign up here.
