Newcomer Fount lists metaverse and subscription ETFs
South Korean robo-adviser Fount is listing two thematic ETFs on the NYSE, which will be added to its model portfolios back in its native Korea. Robo-advisers are online money managers that use ETFs make investment portfolios for retail investors.
- Fount Metaverse ETF (MTVR)
- Fount Subscription Economy ETF (SUBS)
Both funds will be operated by white labeller Exchange Traded Concepts, which will spare Fount the expense of having to build an ETF issuer from scratch. They will be self-indexed, tracking indices managed by Fount but calculated by Mooregate, the index house recently acquired by Morningstar.
Like most thematic ETFs, the funds will use keyword searches to identify companies that fit the theme. However, in an interesting wrinkle, the indexes will use 1-year forward thematic revenue projections to determine theme fit as well. In other words, they guess how much money a company will make from a theme next year.
MTVR will invest in virtual reality companies, the “metaverse”. This will include pure plays like Matterport, but also companies providing “related services and products” like Facebook.
SUBS will invest in companies running subscription-based business models. This will primarily include technology companies like Microsoft and Netflix. Both will hold roughly 50 stocks.
Fount has USD$750M in its Korean robo-advice portfolios the Korean media indicates.
The funds charge 0.70%.
Bernie’s commentary – an improved robo-advice model
Robo-advice was all the rage a few years back. It was touted as the next frontier in the ETF revolution, which would replace high-paid financial advisers much like ETFs replaced high-paid fund managers. However as the results trickled in over the years it became increasingly clear that it would struggle to live up to the hype.
There were two reasons. For one, they ran into direct competition from brokers like Schwab and IBKR, who could just build robo-advice into their own interfaces. They also came under competition from ETF providers themselves, especially Vanguard and BlackRock which created their own robo-advisers as well as their own multi-asset ETFs (which are kind of like robo-advice-lite).
The thing I like about Fount’s new listings is they improve the robo-advice business model. By charging an advice fee, and by also clipping the ETF fee, Fount can thicken its revenue stream. Most robo-advisers never generated enough revenue to break even.
However this model for me does raise questions elsewhere. For one, does regulation allow this in other countries? I know in some countries, regulators ban financial advisers (include robos) from buying their in-house funds. It’s a conflict. Also why did Fount list these in the US rather than in their native Korea? Is Korean-US brokerage efficient? Will Americans buy these ETFs at all? And if not, is that a problem?
Still, this it will be interesting to see how this goes.
NB. the SUBS fund also seems to contain a stock restricted by OFAC, not sure how this is possible or a mistake that a new provider needs to address.