NightShares stays awake during the day, and gears during the night
NightShares, the newly-launched ETF provider that made waves recently launching the “night effect” ETF, is doubling down on its concept, launching a geared night effect ETF that also provides day-time exposure.
The NightShares 500 1x/1.5x ETF (NSPL) will be actively managed and stay invested in the S&P 500 24/7.
During the day, it will invest directly in an S&P 500 ETF like SPY or IVV. But during the night it will invest in the active S&P 500 futures contract on a 1.5x basis. The aim of this is to create a tilt towards the “night effect”--an alleged tendency of the S&P 500 to perform better at night.
The fund charges 0.77%.
Bernie’s commentary – not much night effect so far
When the original night effect ETF started trading in July, I was in two minds about it. On the one hand, the back tests looked brilliant. The thesis behind it made sense as most earnings announcements occur outside regular trading hours. So if you’re in the market at night rather than during the day, you’re better placed to capture this.
Yet on the other hand, back tests always look brilliant. (I often think that cynicism about back tests is an indication of how long you’ve been in the industry). And there’s no difference in performance between Australia-listed S&P 500 ETFs and US-listed ones. If the night effect is real, then surely S&P 500 ETFs that trade during US nighttime would outperform those that trade during the US daytime. (Australian market makers use futures to price S&P 500 ETFs throughout the Australian trading day).
We’re only a couple of months in, but there’s been no difference in performance so far between the original night effect ETF (NSPY) and a regular S&P 500 ETF. Investors haven’t been convinced; NSPY sits on $3 million in AUM. However, the past two months has admittedly been pretty difficult for everyone to gather assets. So maybe it's an unfair timeline for both performance and AUM.
In terms of this product specifically, I do wonder what’s the difference between buying this ETF and buying NSPY and SPY in a 60/40 ratio. Surely the return would be the same given the exposures. And I do wonder, given the low asset levels in NSPY, if this fund is targeting a middle-ground that doesn’t quite exist yet.
Still, this fund rests on reasonable grounding. Maybe it all just needs time.