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Tidal Investments plans to offer a family of actively managed exchange traded funds that take leveraged long positions in pioneering and innovative companies and pair those with short positions in their legacy counterparts, a regulatory filing shows.
The new Battleshares family of strategies comprises eight ETFs across the entertainment, finance, news and technology sectors, according to the filing. The Battleshares NVDA vs INTC ETF, for example, will take a leveraged long position in Nvidia and a short position in Intel.
Tidal described Nvidia as a “new leader” in semiconductors and Intel as a “legacy leader” in the filing.
Battleshares seeks to profit from the disruption occurring in different industries, the filing suggested.
Each ETF will target a leveraged long position of 180 to 220 per cent in the pioneer company and a negative 80 to negative 120 per cent in the counterpart legacy leader, according to the filing.
Tidal will use a mix of equity investments, short sales of securities, swaps and listed options, the filing said.
The ETFs’ investment objective has not been adopted by their respective boards of trustees, meaning they can be changed before receiving approval from the Securities and Exchange Commission, according to the filing.
No fees or tickers for the strategies were included in the filing.
A Tidal spokesperson declined to comment on the filing.
This article was previously published by Ignites, a title owned by the FT Group.
The Battleshares funds could stand out among rivals that are typically more diversified in their holdings, said Morningstar analyst Dan Sotiroff. They may generate interest among clients who trade daily and have favoured ETFs with leveraged positions in companies similar to single-stock ETFs, but they are not designed for average investors, he added.
“It’s interesting and it might get some attention . . . but these ETFs are likely designed for the type of investor that is probably a lot more active than they should be,” said Sotiroff.
Another potential headwind is that the highly leveraged nature of the ETFs makes investments more sensitive to swings in share prices.
“The strategy will follow a very different trajectory than the broader market, which could be good or bad,” said Sotiroff.
Leveraged ETFs and other similar investments such as single-stock ETFs have drawn attention not just from some investors but also from regulators and industry trade groups.
Some trade groups have said that ETFs using highly leveraged investment strategies should be required to disclose more information about risk than other funds and should also be subjected to more scrutiny and restrictions.
*Ignites is a news service published by FT Specialist for professionals working in the asset management industry. Trials and subscriptions are available at ignites.com