New York-based asset management firm Quantify Funds announced the launch of so-called “stacked ETFs” to give advisors greater diversification within their portfolios.
The STKD Bitcoin & Gold ETF (BTGD), launched this week, provides exposure to two assets that have been gaining attention from advisors and investors lately. STKD, which is short for “stacked,” is an investment where the fund provides access to two assets simultaneously that are stacked on top of each other with a common investable theme, the firm said.
“We believe this is one of the most interesting fast-growing categories within leveraged ETFs,” said David Dziekanski, CEO and CIO with Quantify Funds. “The rebalancing mechanisms built into this category make them much less path dependent than traditional leveraged ETFs, and therefore much more suitable for SMA’s and model portfolios.”
Stacked funds are a type of portable alpha, which is an investment style that separates the excess returns from the market return of a portfolio, he said. In the case of the new ETF, for every $1 invested, the ETF provides 100% exposure to the bitcoin strategy and 100% exposure to the gold strategy, he said.
The ETF does not invest directly into gold or bitcoin but rather in gold and bitcoin futures, along with gold and bitcoin exchange traded products, Dziekanski said.
“It’s hard to get this level of leverage without using futures, and futures are one of the most cost-effective forms of leverage we have on this planet today,” he said. “The cost of leverage is typically better than what the average retail investor would be able to get on margin rates.”
The firm decided on gold and bitcoin because of their recent popularity. Both are considered scarcity assets, meaning they have a limited supply and replicating them is difficult, he said. Gold mines are expected to increase in supply by only 1.75% per year, while bitcoin supply is expected to increase less than 1%, Dziekanski said, citing statistics from the World Gold Council and blockchain.com.
“I think there’s diversification benefits in mixing the two,” Dziekanski said. “The two are very much investable in a common theme.”
Quantify, which opened its doors about a year ago, will roll out more stacked funds going forward, Dziekanskis said.
“We have every intention of making this a full lineup,” he said. “We have many concepts on the drawing board, but none have been filed.”
The new ETF, which has a 95-basis point expense ratio, is available on most major platforms, according to Dziekanski. It provides protection against inflation and a viable alternative to equities, he added.
“Equities have had a phenomenal run, but it’s time to protect against a drop in the U.S. dollar, and so much of the equity rally in the U.S. has been tied to further appreciation of the U.S. dollar,” he said. “We believe investors should seek scarcity assets that can appreciate against the U.S. dollar, and feel bitcoin and gold are two of the best out there.”
