As single-stock exchange-traded funds cross the one-year mark since the first funds hit the marketplace, interest in the leveraged products remains very much correlated with the popularity of its underlying stock.
“There’s always enthusiasm for companies like Tesla, be it on the long and the short side,” GraniteShares CEO Will Rhind told Courtney Reagan on CNBC’s “ETF Edge” on Monday.
“[And] Nvidia really has captured the AI zeitgeist so far this year,” he said. “A huge amount of interest in that particular name.”
GraniteShares rolled out its first batch of single-stock ETFs in August 2022 with products tracking mainstay names Tesla, Apple and Coinbase. While its 1.25x Long Tsla Daily ETF (TSL) and 1.75x Long AAPL Daily ETF (AAPB) have logged considerable gains in 2023, the Coinbase rally has pushed its 1.5x Long COIN Daily ETF (CONL) up 123% year to date.
Looking at flows more broadly, Rhind explained that a lot of money has gone into fixed income ETFs and money market funds since the beginning of the year.
“So, I think that the rally that we’ve seen more broadly over the last six months maybe hasn’t been as participated in as you might think, just [by] looking at the actual performance numbers.”
Because single-stock products are leveraged, Rhind said that the products lend themselves more to short-term activity and exposures.
“So, one way to measure interest is not just the assets under management,” he said, “but the amount of volume and the value traded on an exchange.”
GraniteShares 1.5x Long NVDA Daily ETF (NVDL) has emerged as the outperformer of the firm’s lineup, up more than 349% this year. First rolled out in December 2022, the fund has garnered $172 million in inflows.
Besides reaping the benefits of a fund attached to a stock in vogue, Dave Nadig, financial futurist at VettaFi, said that the products are advantageous for investors with discount brokerage accounts who do not have access to options and margin borrowing.
“ETFs now serve all kinds of investors, from long-term buy-and-hold investors who trade every 30 years, to day traders who trade every 30 minutes,” Nadig said in the same interview on Monday. “These products obviously lean much more toward that speculative side of the balance sheet, and the trading volumes have been substantial.”
Nadig added that investors can expect to see more single-stock ETFs coming to the market, but it’s up to investor interest and market trends to ultimately bolster activity.
“A lot of them will sit around and be uninteresting and languish for a while until there’s a headline,” he said. “And then, all of a sudden, we’re going to be talking about why everybody is trading IBM dailies. I think it’s going to be a very different world.”