Latest news with #ETFs
Bloomberg
4 hours ago
- Business
- Bloomberg
Hong Kong, Saudi Bourses Seek Deeper Ties to Spur Trading Volume
Hong Kong and Saudi Arabia are ramping up efforts to boost trading activity as inflows to their exchange-traded funds wane and cross-listings fail to materialize. Hong Kong Exchanges & Clearing Ltd. Chief Executive Officer Bonnie Chan and Mohammed Al-Rumaih, her counterpart at the Tadawul stock exchange, are poised to address the co-hosted Capital Markets Forum in Hong Kong on Thursday. The city's financial secretary Paul Chan and Securities and Futures Commission head Julia Leung will also speak.
Bloomberg
15 hours ago
- Business
- Bloomberg
State Street's Second Bid to Bring Private Credit to the Masses
Welcome to Going Private, Bloomberg's twice-weekly newsletter about private markets and the forces moving capital away from the public eye. Today, we take a look at a niche fundraising tool that's becoming increasingly popular, as well as the fine-print of a record private credit deal struck in the Asia Pacific region. But first, State Street's double-down on private credit ETFs. If you're not already on our list, sign up here. Have feedback? Email us at goingprivate@ — Silas Brown and Kat Hidalgo. If at first you don't succeed... open another private debt ETF.
Yahoo
15 hours ago
- Business
- Yahoo
Wall Street's Rush to Launch Vanguard-Style Funds Draws Warnings
(Bloomberg) — Exchange-traded funds have amassed trillions of dollars by offering investors greater tax efficiency, liquidity and lower costs than mutual funds. Now, a looming regulatory shift is poised to bring the two vehicles closer together — and threatens to complicate the very features that fueled the ETF boom. NY Wins Order Against US Funding Freeze in Congestion Fight The US Securities and Exchange Commission is expected to approve applications for dual-share-class structures, perhaps as soon as this summer, allowing managers to add an ETF sleeve to an existing mutual fund. More than 50 firms, including BlackRock Inc. and State Street Corp., are waiting for the regulator's greenlight to deploy the hybrid structure — made possible after Vanguard Group Inc.'s exclusive patent expired two years ago. The two-in-one blueprint is a tantalizing prospect for asset managers looking to break into the ETF market at scale, without having to launch a new strategy from scratch. It also offers a lifeline to firms battered by years of mutual-fund outflows, as investors fled for more tax-efficient alternatives. The hybrid structure famously helped Vanguard save its clients billions in taxes over two decades. Yet replicating that playbook may prove harder than it looks. Some Wall Street experts caution the shake-up could erode key benefits of the wrapper, especially if hybrid funds face significant withdrawals during market stress. 'I've been in the ETF business for 20 years — we have spent it talking about how great they are at managing capital gains, and I don't think folks have an appreciation for how more ETFs could potentially end up paying capital gains distributions,' said Brandon Clark, director of ETF business at Federated Hermes, who previously led the ETF capital markets team at Vanguard. At the heart of the concern is a tax dynamic that ETFs were built to avoid. These funds rarely pay capital-gains tax distributions, thanks to their in-kind redemption process, which allows the issuer to swap securities with authorized participants rather than sell them outright. By contrast, mutual funds redeem in cash, meaning managers may need to sell securities to meet outflows. If those sales generate capital gains, they may distribute them to investors. In a hybrid vehicle, those taxable gains risk getting passed onto ETF shareholders, too. 'For mutual funds drawing inflows or net zero flows, there should be no issues, but for ones with outflows, there's a potential risk for the ETF holders,' said Bloomberg Intelligence senior ETF analyst Eric Balchunas, in a note. About two-thirds of ETF issuers surveyed by consulting firm Cerulli Associates flagged this spillover issue. There's precedent. In 2009, a Vanguard fund distributed a 14% capital gain across both share classes, after a large mutual-fund withdrawal, Bloomberg data show. Though rare, the episode underscores the fiscal complications in the event a fund experiences outsized outflows within a shared portfolio. 'The investors that stand to benefit most immediately are the ones that already own the fund, as it can only improve the fund's tax efficiency,' said Ben Johnson, head of client solutions at Morningstar Inc. Wirehouses like UBS Group Inc., which list funds for financial advisers, are studying how this would impact which funds they will offer on their platforms. An ETF share class could 'run the risk of receiving tax distributions they otherwise wouldn't have,' said Mustafa Osman, who runs due diligence on funds before they are added to the platform as head of ETF and mutual fund strategy and analytics at UBS. The SEC refers to this issue as 'cross-subsidization' and has directed applicants to detail how they'll mitigate it. In response, firms like Dimensional Fund Advisors have amended their applications to detail a governance structure where the fund works with its independent board to determine if the dual structure is beneficial to both shareholders, while monitoring risks like cross-subsidization before and after launch. Among issues that would be considered: cash levels, unrealized gains and losses, and turnover. Even standalone ETFs are paying out more capital gains more frequently these days, as more products track derivatives or assets that have risen markedly in value. In 2024, roughly 5% of passive ETFs paid out capital gains, the most since 2021, and 12% of active ones did, the highest since 2022, data compiled by Bloomberg show. Those figures are much larger for mutual funds, of course, with more than 50% paying them out last year. Another complication lies in how the structure would impact the economics of ETF listings on big-name platforms. Cerulli estimates wirehouses and broker-dealer platforms could lose as much as $30 billion in revenue if mutual fund assets shift to ETF share classes in droves. To stem the loss of revenue, intermediaries could begin to introduce revenue-sharing agreements with ETF issuers, which may ultimately raise costs for investors. 'This trend of trying to recapture some of that revenue that's been slowly melting from the mutual funds has been in place for ETFs for the last few years,' said Ben Slavin, global head of ETFs at BNY. Beyond fees and tax advantages, ETFs famously offer more liquidity than mutual funds — a selling point that may be undermined in some instances, if the two models are combined. According to Cerulli, ETFs that struggle to scale could see wider bid-ask spreads, with costs ultimately passed onto investors. All told, this is uncharted territory. Vanguard's success relied on stable flows, deep relationships with market makers and highly liquid portfolios. Large firms may be able to follow suit smoothly, but smaller managers holding less liquid assets could find the road ahead trickier. 'It's not evident that authorized participants are ready for a plethora of smaller ETFs as a share class exposures, especially outside the most liquid underlying markets,' Cerulli researchers wrote in a report. Mark Zuckerberg Loves MAGA Now. Will MAGA Ever Love Him Back? Millions of Americans Are Obsessed With This Japanese Barbecue Sauce Why Apple Still Hasn't Cracked AI Inside the First Stargate AI Data Center How Coach Handbags Became a Gen Z Status Symbol ©2025 Bloomberg L.P.
Bloomberg
16 hours ago
- Business
- Bloomberg
Wall Street's Rush to Launch Vanguard-Style Funds Draws Warnings
Exchange-traded funds have amassed trillions of dollars by offering investors greater tax efficiency, liquidity and lower costs than mutual funds. Now, a looming regulatory shift is poised to bring the two vehicles closer together — and threatens to complicate the very features that fueled the ETF boom. The US Securities and Exchange Commission is expected to approve applications for dual-share-class structures, perhaps as soon as this summer, allowing managers to add an ETF sleeve to an existing mutual fund. More than 50 firms, including BlackRock Inc. and State Street Corp., are waiting for the regulator's greenlight to deploy the hybrid structure — made possible after Vanguard Group Inc. 's exclusive patent expired two years ago.
Globe and Mail
18 hours ago
- Business
- Globe and Mail
1 Unstoppable Cryptocurrency to Buy Before It Soars 2,101%, According to Cathie Wood's ARK Invest
Cathie Wood is the chief executive officer of ARK Investment Management, which operates several exchange-traded funds (ETFs) focused on disruptive technologies. Cryptocurrencies are an area of focus for ARK, and it was one of the first firms to receive approval from the Securities and Exchange Commission (SEC) to launch a Bitcoin (CRYPTO: BTC) exchange-traded fund (ETF) last year. Bitcoin is the world's largest cryptocurrency by market value, and ARK is extremely bullish about its future. In 2024, the firm issued a forecast that suggested the crypto could reach $1.5 million by 2030, implying a potential upside of 1,276% from its current price of $109,000 as of this writing. Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More » But last month, ARK released a new report with a fresh set of predictions and revised its bull case to $2.4 million per coin by 2030, which implies it could soar by 2,101% instead. But how realistic is that target? A unique asset Had you invested $1,000 in Bitcoin 10 years ago, it would be worth $451,600 today. The same investment in the S&P 500 index would have grown to just $2,730 over the same period. It now has a market capitalization of $2.18 trillion, so if it were a company, it would be the fourth largest in the world. The digital coin has a unique set of qualities differentiating it from most other investible assets, and even most other cryptocurrencies. It's completely decentralized, so it can't be controlled by any person, company, or government. It's also scarce thanks to a fixed supply of 21 million coins -- 19.8 million of which are in circulation (the rest will be slowly mined by about 2140). Lastly, it's built on a secure system of record called the blockchain, where transactions are publicly verifiable. With that said, Bitcoin doesn't produce any revenue or earnings, nor is it very useful as a currency because of its extreme volatility, so it's still a highly speculative asset. It's more like a digital version of gold than a stock or the U.S. dollar, so further upside is contingent on the willingness of other investors to continually pay a higher price. ARK points to three primary catalysts that could drive further upside In ARK's new April report, it highlighted six catalysts to support its $2.4 million price target. But it pointed to three of them as primary catalysts, meaning they will have a much larger influence on the price between now and 2030: Institutional investment: ETFs enable financial advisors and institutional investors to own Bitcoin in a safe and regulated manner. Previously, they needed to use digital crypto wallets, which can be susceptible to hacks and irrecoverable losses. ARK says institutional investors will have about $200 trillion in assets under management by 2030, and predicts 6.5% of that figure could flow into Bitcoin thanks to ETFs. Digital gold: As I mentioned earlier, the crypto is often thought of as a digital version of gold, except it's easier to transfer ownership, which could make it more attractive in the contemporary economy. As a result, ARK thinks 60% of the money that is currently allocated to gold could be shifted into Bitcoin by 2030 instead. An emerging-market currency: Developing countries tend to have volatile currencies, which drastically affects their citizens' purchasing power. ARK believes the digital coin could be the ultimate safe asset to help these nations hedge against inflation and other economic headwinds. According to ARK's modeling, these three catalysts will contribute 92.5% of the value in the firm's $2.4 million price target. If it proves to be accurate, investors who buy the crypto today would earn a 2,101% return by 2030. But is a $2.4 million target achievable? If we take ARK's $2.4 million target and multiply it by Bitcoin's total supply of 21 million coins, we get a market capitalization of $50.4 trillion. In other words, the cryptocurrency would be 15 times more valuable than the world's largest company, Microsoft, which has a market cap of $3.4 trillion today. Moreover, it would be worth more than the entire annual output of the U.S. economy, which was $29.7 trillion last year. To me, that doesn't sound realistic for an asset with no revenue, no earnings, and no proven use case. Plus, Bitcoin ETFs have only attracted about $134 billion in inflows since the SEC started approving them in January last year, and ARK's forecast relies on that figure reaching a staggering $13 trillion by 2030 (or $2.6 trillion per year for the next five years). Based on the evidence so far, that doesn't seem likely. Even if investors consider the digital token to be a viable alternative to gold, humans have used the precious metal for thousands of years, and the value of all above-ground reserves is just $22.5 trillion today. If the crypto's market cap rose to match gold's market cap, it would translate to a price per coin of $1.07 million which is still well short of ARK's target. In summary, I think ARK's $2.4 million price prediction for Bitcoin is a little ambitious. The cryptocurrency might continue to trend higher from here, but investors should probably temper their expectations because the best returns might be in the rearview mirror. 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