Evolve launches mildly geared FANGMA ETF
Canadian small independent ETF issuer Evolve has launched an ETF that narrowly targets the largest US tech companies, with gearing.
The Evolve Enhanced FANGMA Index ETF (TECE) tries to provide 125% of the daily performance of the Solactive FANGMA Equal Weight Index, hedged in Canadian dollars.
The index is very simple, and is made of just the six FANGMA stocks, equally weighted. (Facebook, Amazon, Netflix, Google, Microsoft, Apple).
The fund will achieve its gearing by borrowing cash from a Canadian bank, worth up to 25% of the fund’s net asset value. The gearing will need to be continually monitored to ensure the fund provides 125% of its index return.
The fund charges 0.50%.
Bernie’s commentary – where’s Nvidia and Tesla?
This is a nice idea. Using a small amount of gearing to build up a position in the FANGMA seems to me like a good way to build wealth. The FANGMA are de facto monopolies. And the gearing is achieved by borrowing the cash rather than through derivatives, which is simpler and safer. This has the strengths of reducing risk for retail investors, as there are no margin calls. What is more, as the fund is borrowing the cash in the wholesale market, what investors pay on the management fee they should get back in superior interest rate. (Banks lend at lower interest rates to fund managers when they borrow money, than to retail investors when they margin trade).
If I had a question, it would be about the absence of Nvidia and Tesla. I know the FANG+ Index by ICE, which sort of got this whole FANG index stone rolling, includes Nvidia and Tesla as well as these six stocks. So I’m wondering why they’ve been left out here. Especially given that Nvidia and Tesla have been the best performing of the lot the past five years.