BlackRock launches active thematic ETF
BlackRock is launching an actively managed fintech ETF, with a portfolio managed by its Fundamental Equity franchise.
The BlackRock Future Financial and Technology ETF (BPAY) will invest in fintech companies, where fintech is understood to include companies “delivering innovative and emerging technologies used in the financial services industry”.
The ETF is fully transparent, with its holdings published daily to BlackRock’s website. BlackRock indicates that it intends to focus on financial software, discount brokerages, payment apps, blockchain and debit card companies. The fund will only invest in global companies, with a focus on the US.
On a superficial review, its holdings look very similar to competitor thematic ETFs. They include, Charles Schwab, Stone & Co., PayPal, Block, Visa and Mastercard.
This BlackRock’s sixth actively managed thematic ETF
The fund charges 0.70%.
Bernie’s commentary – can BlackRock beat Cathie Wood?
A lot of thematic ETFs that track indexes aren’t passive at all. If you look at thematic indexes quantitatively, they have huge active share versus sector benchmarks. And the way the indexes usually get built is the ETF provider, working with the index company, reverse engineer the portfolio in a process that blends indistinguishably into active management. So by going the active route BlackRock has been, in my opinion, straightforward about how things work.
The big question though is how well this actively managed fund will perform, and whether it will beat Cathie Wood. ARKF – the ARK Fintech ETF – has been something of a roller coaster. It crushed the index in 2020 and Wood was hailed as a genius, appearing on the front pages of newspapers. Since then, it’s fallen 80% and the fund is down 9% since inception. Wood looks less clever now, however the fund still holds $900M in assets.
So to me, this looks like the classic case of “who’s the better active manager?” The ETF industry was built in direct opposition to this line of thinking--and the irony is not lost on me.
Fortunately for BlackRock, ARKF has seen $115 million in outflows year-to-date. And as we all know, once an active fund is hit with outflows, the money is nigh impossible to get back. By contrast, outflows experienced by index ETFs can always be recovered. That's because when index ETFs underperform, investors think "it's just the market and not really your fault, you're just passive". There's no blame.