Latest news with #TidalFinancialGroup
Zawya
6 days ago
- Business
- Zawya
Ballooning 'buffer' ETF market leads to more complex array of products
Investors are piling into financial products that offer them the chance to forgo some potential gains in exchange for protection against a market selloff, with the number of exchange-traded funds offering variants on this concept doubling in number and size over the last two years. So far this year, some 30 of these so-called buffer funds have made their debut in the U.S. as investors try to protect recent gains from the risk that soaring valuations and ongoing policy tumult will prompt a retreat. That brings the total number to nearly 350, compared to 178 two years ago, according to data from Tidal Financial Group. Each launch provides a new twist on the concept as more asset managers battle to win a piece of a pie worth $70 billion today and one that BlackRock expects to hit $650 billion by the end of the decade. But the rapid growth and growing complexity of the new ETFs are fueling anxiety among some analysts and market participants that the asset management universe may be hitting "peak buffer", a point at which products become too exotic and too focused on a narrow market segment to be useful tools for most investors. That, in turn, creates the prospect of investors putting money into costly or unsuitable products. "There are only so many ways to skin the cat, so every new product becomes more niche," said Dave Nadig, an independent ETF industry consultant. "The likelihood of any new product being brought out now that an investor's portfolio really requires is pretty small." That is not stopping issuers from trying, however. Today, investors can buy risk-protected bitcoin products, buffer their exposure to Chinese Internet stocks, and own next-generation "dual direction" buffer ETFs, designed not just to minimize losses but to give investors capped gains in both rising and falling markets. Plain vanilla buffer ETFs offer investors a way to swap part of their upside for some kind of cushion against losses on a portfolio of stocks, most usually an index like the S&P 500 . The structure dates back to the 1980s, when it underpinned structured notes that were then fast becoming part of high-net worth investor portfolios. Those still represent the lion's share of the market, with pioneers First Trust and Innovator Capital Management accounting for about 86% of buffer ETF assets and about 75% of inflows into the space in the first seven months of 2025, according to data provided by issuers and verified by Reuters. But a filing in early July by a surprise new entrant into the buffer field - ARK Investments, the technology asset management firm founded by Cathie Wood - has prompted further debate. ARK is seeking approval from U.S. regulators to launch a suite of new buffer ETFs tied to its flagship ARK Innovation ETF . If they pass regulators' scrutiny, these would be the first ETFs tied to an underlying actively managed fund rather than a broad market index and shield investors from the first 50% of any losses on ARK Innovation. In exchange, investors relinquish the first 6% of any gain. "It's a strange combination, to have a buffer alongside the high-conviction ARK Innovation strategy," said Bryan Armour, ETF analyst at Morningstar. "It's coming from the firm that was a pioneer of risk-taking and stockpicking in the ETF space." That strategy has produced uneven returns, with the ARKK ETF generating a 152.8% return in 2020 but a 67% loss in 2022. So far this year, the ETF is up 32.8%, compared to 6% for the S&P 500 index, but both it and ARK continue to lose assets. ARK executives declined to comment on the details of the filing, citing SEC restrictions during the post-filing "quiet period." ARK could launch the new buffer in early September, at which point it will test investor appetite for more novel structures. "My eyebrows are pretty much raised," said Kevin Warman, a financial advisor with Investment Management Corp, in Mount Pleasant, South Carolina. "But I'm not surprised that more companies are jumping on the bandwagon." Relative newcomers include Goldman Sachs Asset Management - its first buffer ETF began trading in January - and BlackRock, which rolled out its first offerings in mid-2023, more than four years after Innovator and First Trust launched their own offerings. Asset managers insist that the market for buffers is nowhere close to saturated yet, even as analysts and some financial advisors are watching the flood of new offerings with wariness. Still, Warman said he and his colleagues are struggling to keep up with the details of each new product that launches. "We want to make sure whichever of these we buy delivers on a real need," he said. (Reporting by Suzanne McGee; Editing by Alden Bentley and Nia Williams)
Yahoo
6 days ago
- Business
- Yahoo
Ballooning 'buffer' ETF market leads to more complex array of products
By Suzanne McGee NEW YORK, August 4 (Reuters) -Investors are piling into financial products that offer them the chance to forgo some potential gains in exchange for protection against a market selloff, with the number of exchange-traded funds offering variants on this concept doubling in number and size over the last two years. So far this year, some 30 of these so-called buffer funds have made their debut in the U.S. as investors try to protect recent gains from the risk that soaring valuations and ongoing policy tumult will prompt a retreat. That brings the total number to nearly 350, compared to 178 two years ago, according to data from Tidal Financial Group. Each launch provides a new twist on the concept as more asset managers battle to win a piece of a pie worth $70 billion today and one that BlackRock expects to hit $650 billion by the end of the decade. But the rapid growth and growing complexity of the new ETFs are fueling anxiety among some analysts and market participants that the asset management universe may be hitting "peak buffer", a point at which products become too exotic and too focused on a narrow market segment to be useful tools for most investors. That, in turn, creates the prospect of investors putting money into costly or unsuitable products. "There are only so many ways to skin the cat, so every new product becomes more niche," said Dave Nadig, an independent ETF industry consultant. "The likelihood of any new product being brought out now that an investor's portfolio really requires is pretty small." That is not stopping issuers from trying, however. Today, investors can buy risk-protected bitcoin products, buffer their exposure to Chinese Internet stocks, and own next-generation "dual direction" buffer ETFs, designed not just to minimize losses but to give investors capped gains in both rising and falling markets. Plain vanilla buffer ETFs offer investors a way to swap part of their upside for some kind of cushion against losses on a portfolio of stocks, most usually an index like the S&P 500. The structure dates back to the 1980s, when it underpinned structured notes that were then fast becoming part of high-net worth investor portfolios. Those still represent the lion's share of the market, with pioneers First Trust and Innovator Capital Management accounting for about 86% of buffer ETF assets and about 75% of inflows into the space in the first seven months of 2025, according to data provided by issuers and verified by Reuters. But a filing in early July by a surprise new entrant into the buffer field - ARK Investments, the technology asset management firm founded by Cathie Wood - has prompted further debate. ARK is seeking approval from U.S. regulators to launch a suite of new buffer ETFs tied to its flagship ARK Innovation ETF. If they pass regulators' scrutiny, these would be the first ETFs tied to an underlying actively managed fund rather than a broad market index and shield investors from the first 50% of any losses on ARK Innovation. In exchange, investors relinquish the first 6% of any gain. "It's a strange combination, to have a buffer alongside the high-conviction ARK Innovation strategy," said Bryan Armour, ETF analyst at Morningstar. "It's coming from the firm that was a pioneer of risk-taking and stockpicking in the ETF space." That strategy has produced uneven returns, with the ARKK ETF generating a 152.8% return in 2020 but a 67% loss in 2022. So far this year, the ETF is up 32.8%, compared to 6% for the S&P 500 index, but both it and ARK continue to lose assets. ARK executives declined to comment on the details of the filing, citing SEC restrictions during the post-filing "quiet period." ARK could launch the new buffer in early September, at which point it will test investor appetite for more novel structures. "My eyebrows are pretty much raised," said Kevin Warman, a financial advisor with Investment Management Corp, in Mount Pleasant, South Carolina. "But I'm not surprised that more companies are jumping on the bandwagon." Relative newcomers include Goldman Sachs Asset Management - its first buffer ETF began trading in January - and BlackRock, which rolled out its first offerings in mid-2023, more than four years after Innovator and First Trust launched their own offerings. Asset managers insist that the market for buffers is nowhere close to saturated yet, even as analysts and some financial advisors are watching the flood of new offerings with wariness. Still, Warman said he and his colleagues are struggling to keep up with the details of each new product that launches. "We want to make sure whichever of these we buy delivers on a real need," he said. Sign in to access your portfolio
Reuters
6 days ago
- Business
- Reuters
Ballooning 'buffer' ETF market leads to more complex array of products
NEW YORK, August 4 (Reuters) - Investors are piling into financial products that offer them the chance to forgo some potential gains in exchange for protection against a market selloff, with the number of exchange-traded funds offering variants on this concept doubling in number and size over the last two years. So far this year, some 30 of these so-called buffer funds have made their debut in the U.S. as investors try to protect recent gains from the risk that soaring valuations and ongoing policy tumult will prompt a retreat. That brings the total number to nearly 350, compared to 178 two years ago, according to data from Tidal Financial Group. Each launch provides a new twist on the concept as more asset managers battle to win a piece of a pie worth $70 billion today and one that BlackRock (BLK.N), opens new tab expects to hit $650 billion by the end of the decade. But the rapid growth and growing complexity of the new ETFs are fueling anxiety among some analysts and market participants that the asset management universe may be hitting "peak buffer", a point at which products become too exotic and too focused on a narrow market segment to be useful tools for most investors. That, in turn, creates the prospect of investors putting money into costly or unsuitable products. "There are only so many ways to skin the cat, so every new product becomes more niche," said Dave Nadig, an independent ETF industry consultant. "The likelihood of any new product being brought out now that an investor's portfolio really requires is pretty small." That is not stopping issuers from trying, however. Today, investors can buy risk-protected bitcoin products, buffer their exposure to Chinese Internet stocks, and own next-generation "dual direction" buffer ETFs, designed not just to minimize losses but to give investors capped gains in both rising and falling markets. Plain vanilla buffer ETFs offer investors a way to swap part of their upside for some kind of cushion against losses on a portfolio of stocks, most usually an index like the S&P 500 (.SPX), opens new tab. The structure dates back to the 1980s, when it underpinned structured notes that were then fast becoming part of high-net worth investor portfolios. Those still represent the lion's share of the market, with pioneers First Trust and Innovator Capital Management accounting for about 86% of buffer ETF assets and about 75% of inflows into the space in the first seven months of 2025, according to data provided by issuers and verified by Reuters. But a filing in early July by a surprise new entrant into the buffer field - ARK Investments, the technology asset management firm founded by Cathie Wood - has prompted further debate. ARK is seeking approval from U.S. regulators to launch a suite of new buffer ETFs tied to its flagship ARK Innovation ETF (ARKK.P), opens new tab. If they pass regulators' scrutiny, these would be the first ETFs tied to an underlying actively managed fund rather than a broad market index and shield investors from the first 50% of any losses on ARK Innovation. In exchange, investors relinquish the first 6% of any gain. "It's a strange combination, to have a buffer alongside the high-conviction ARK Innovation strategy," said Bryan Armour, ETF analyst at Morningstar. "It's coming from the firm that was a pioneer of risk-taking and stockpicking in the ETF space." That strategy has produced uneven returns, with the ARKK ETF generating a 152.8% return in 2020 but a 67% loss in 2022. So far this year, the ETF is up 32.8%, compared to 6% for the S&P 500 index, but both it and ARK continue to lose assets. ARK executives declined to comment on the details of the filing, citing SEC restrictions during the post-filing "quiet period." ARK could launch the new buffer in early September, at which point it will test investor appetite for more novel structures. "My eyebrows are pretty much raised," said Kevin Warman, a financial advisor with Investment Management Corp, in Mount Pleasant, South Carolina. "But I'm not surprised that more companies are jumping on the bandwagon." Relative newcomers include Goldman Sachs Asset Management - its first buffer ETF began trading in January - and BlackRock, which rolled out its first offerings in mid-2023, more than four years after Innovator and First Trust launched their own offerings. Asset managers insist that the market for buffers is nowhere close to saturated yet, even as analysts and some financial advisors are watching the flood of new offerings with wariness. Still, Warman said he and his colleagues are struggling to keep up with the details of each new product that launches. "We want to make sure whichever of these we buy delivers on a real need," he said.
Yahoo
24-07-2025
- Business
- Yahoo
ETF Wave Hasn't Crested Yet, Tidal Co-Founder Says
Tidal Financial Group had quite a different name when it was founded in 2012. Back then, it was called Toroso, which means 'bull' and 'bear' in Spanish. Now, the New York City-based firm has found success as a third-party service provider that helps build and manage exchange traded funds, and its list of clients keeps growing. Co-founder and Chief Investment Officer Michael Venuto sat down with ETF Upside to talk about the company's roots and what excites him about the future of the business. READ ALSO: Gimme an S&P 500 ETF, Hold the Dividends and Why the SEC Delayed In-Kind Redemptions for Crypto ETFs ETF Upside: Tell us a bit about how Tidal got started and the changes it's been through. Michael Venuto: The idea was to sell SMAs of ETFs — that was very popular back then. I raised some money to start the firm, and I thought all these relationships that I've had for all these years are just going to be like, 'Yeah, Mike — great. Let's do this.' And they didn't. They all said, 'Come back when you have X amount of dollars and when you have a three-year track record.' So we pivoted a bit and said, 'We've got all this great research that's helping us build our portfolios. Could that help asset managers sell their products?' And that's the direction the firm went into the next three or four years. That became a business. It kept the lights on, and we went from not paying ourselves to paying ourselves a third of what we made before we started the firm. Direxion's then-Chief Operating Officer Eric Falkeis said, 'What if I came over there and helped you build the trust? And therefore we could help people grow their assets, but have a carry in the business by being a service provider to them.' Very quickly we got some traction. We got SoFi as a client early on. We got this group, RPAR, that has the Risk Parity ETF. We got this Sharia-compliant manager that nobody had ever heard of, but all of a sudden they're launching ETFs and growing like a weed. It was pretty exciting times. Then it just became about execution. That business model, from 2018 to today, has grown from $1 billion to $36 billion. Today we oversee 230 ETFs and have 76 relationships and 130 employees. It's been an overnight success after 13 years. There are now more active ETFs in the US market than passive ones, thanks in part to the many niche and single-stock products out there. What are your thoughts on that trend? It was a foregone conclusion 10 years ago that there were going to be more ETFs than actual stocks. The way things have come out is different. It's pretty frothy right now. We have this metric that we post each week, the open-to-close ratio, and it's close to five right now, meaning for every five ETFs that launch, only one is closing. Industry health is usually around two. But, we've moved upmarket. We're not really dealing with your day-to-day, call it 'ETF entrepreneur' so much anymore. I think they've learned the lesson that it's really hard. The clients that we're dealing with now tend to be people who already have assets and are just looking to move them towards a better structure. How many ETFs do you think the market can handle? You've still got three times the amount of mutual funds that you do with ETFs. A lot of people are using these ETFs as solutions for their existing business. It's not like there's new assets — it's just putting them into a more efficient vehicle. We're seeing a lot of requests for conversions. What would the advent of dual share classes, pending SEC approval, mean for Tidal? I just attended this founder summit, this was like 30 of the founders in the ETF industry. We probably spent an hour and a half on this subject. The conclusion is that it's going to be good for a few people, but the pipes aren't really there to make this easy for everybody to do. I think this is going to be a boon for DFA or anyone who hasn't fully converted things, anybody who's got both a broker-dealer and the captive assets — that's one of the big benefits Vanguard's always had with this. People have been able to easily switch from the mutual fund to the ETF without taking a tax gain. Any mutual fund shop that is going to have a share class in an ETF, they need to either hire a capital markets team that understands how to deal with all these things, or hire Tidal. This post first appeared on The Daily Upside. To receive exclusive news and analysis of the rapidly evolving ETF landscape, built for advisors and capital allocators, subscribe to our free ETF Upside newsletter. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Globe and Mail
04-07-2025
- Business
- Globe and Mail
AIYY Is an Income ETF Monster
Key Points AIYY pays a distribution yield of more than 100%. But it's mainly returning its investors' cash through those distributions. It's tethered to which has been highly volatile over the past year. Over the past three years, Tidal Financial Group released several high-yield exchange-traded funds (ETFs) with jaw-dropping yields. One of the highest-yielding ones was the YieldMax AI Option Income Strategy ETF (NYSEMKT: AIYY), which was launched in November 2023 and currently pays a distribution rate of 100.8%. Many might scoff at any income investment that pays a monstrous 100% yield, but is it really a high-yield trap? How does this ETF pay a distribution rate of more than 100%? To understand how an ETF like the YieldMax fund works, we should discuss covered call options. In a covered call, you sell a call on a stock you own by choosing an option with a strike price that's higher than the current share price and an expiration date in the future. The buyer pays you a premium for the call, and the value of that option varies according to the stock's volatility and its proximity to the expiration date. Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue » If that stock is still trading below the covered call's strike price at its expiration date, you'll keep your shares and the premium, and the buyer will leave empty-handed. But if the stock has climbed above the strike price, you'll keep the premium but end up selling your shares at that strike price. Many investors write covered calls on their own stocks to generate passive income. That strategy works well when the market trades sideways, but it can backfire during big rallies. To offer investors an alternative to handling the covered call strategy manually, Tidal launched covered-call ETFs, which are pinned to volatile stocks that pay out high premiums that support its distributions. Why is the YieldMax ETF messier and riskier than simple covered calls? The YieldMax fund mainly sells short-term calls (with strike prices 5% to 15% higher than the current stock price) each month to boost its distributions, while parking some of its excess cash in short-term Treasuries to earn interest. This particular ETF's underlying stock is (NYSE: AI), the divisive enterprise artificial-intelligence AI software maker that still trades more than 40% below its initial public offering (IPO) price. But unlike a regular investor, who writes covered calls to generate passive income, the ETF doesn't actually own any shares of Instead, the fund writes covered calls on a "synthetic" long position comprised of longer-dated call and put options instead of owning the stock. That approach requires less capital, since it doesn't need to buy 100 shares of for each covered call. If shares decline, the ETF's synthetic position is designed to match those declines. However, that requires perfect hedging, which can be challenging. Long-dated options used in synthetic positions also decay over time, and the fund needs to keep rolling those positions forward to keep up with shares. The ETF will underperform over the long run trades far below its IPO price, but its revenue growth accelerated again in fiscal 2024 and fiscal 2025 (which ended this April). And it recently extended its crucial deal with Baker Hughes, which accounts for over 30% of its revenue, for another three years. Those catalysts -- along with its fresh federal contracts, cloud partnerships, and generative AI tools -- could drive the stock higher over the next few years. But even if that happens, the YieldMax ETF will underperform stock as its covered call strategy limits its gains. Ideally, it can narrow that gap with its big distributions -- but the messy way it uses synthetic long positions could cause it to lag behind stock. To make matters worse, investors need to pay an annual expense ratio of 1.67% to execute the fund's convoluted strategy, which is much more expensive and confusing than simply buying shares and manually writing covered calls. That's a big part of why the ETF's shares declined 64% over the past 12 months as stock only fell 14%. Even if you had reinvested the fund's big distributions, you would have still ended up with a negative total return of 24%. Investors are mainly getting back their own money Lastly, most of the ETF's distributions are a return of capital (ROC), which means it's mainly returning its investors' cash instead of generating any fresh income. That strategy is constantly eroding its net asset value (NAV) -- which has already dropped 64% over the past 12 months -- and will further limit its upside potential. That's why that 100.8% distribution yield doesn't mean you'll magically double your investment by buying its shares and waiting for the next distributions. That ratio simply means that if its most recent monthly distribution were paid out every month for a year, its total annualized payout would be equivalent to 100.8% of the ETF's current price. But that ratio looks backward instead of forward, and its monthly payouts could decline sharply if volatility declines or its stock crashes. Investors should avoid this "income monster" The YieldMax AI Option Income Strategy ETF might seem like an income-generating monster, but it's a dangerous investment. You're mainly getting back your own money, you're being charged for it, and the ETF will still underperform stock if it rallies -- yet experience steeper declines if it pulls back. Investors should avoid it and stick with more-reliable dividend stocks instead. Should you invest $1,000 in Tidal Trust II - YieldMax Ai Option Income Strategy ETF right now? Before you buy stock in Tidal Trust II - YieldMax Ai Option Income Strategy ETF, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Tidal Trust II - YieldMax Ai Option Income Strategy ETF wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $699,558!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $976,677!* Now, it's worth noting Stock Advisor 's total average return is1,060% — a market-crushing outperformance compared to180%for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of June 30, 2025
