The space ETFs prepping for liftoff ahead of SpaceX IPO

00:00 Speaker A

Space funds are seeing record inflows as investors seek to benefit from SpaceX’s near one and a half trillion dollar anticipated listing.

00:10 Speaker A

Joining me now is Todd Rosenbluth, Head of Research at TMX Vetify for this week’s ETF report brought to you by Pimco. Good to see you, Todd.

00:19 Todd Rosenbluth

Great to be here. Thanks.

00:20 Speaker A

So, you know, everybody’s waiting for SpaceX, I guess. And it used to be that it took a little while for many new entrants to get into an ETF. So not only the ETF’s changing the rules, like the Nasdaq now has a fast track designation to try and get some of these big, um, IPOs into indices more quickly.

00:47 Todd Rosenbluth

Yeah, so this is one of the most highly anticipated IPOs I think of my lifetime. Um, we we’ve had some other companies that have come to market over the years, but the ETF industry has changed in that time period. And we have ETFs that are both broad and are going to have exposure. You’re right, the Nasdaq has changed, so people will likely find uh SpaceX within QQQ in the relatively soon after future of that. But it’s also going to be in ETFs that are more targeted. So the procure space ETF UFO uh is the original of those space ETFs. It’s been around for years, but it’s actually had a great run from a performance and a flow standpoint. So UFO about a year ago had under $100 million in assets. Now it’s over $750 million. It’s up 30% this year. and it’s one of those ETFs that based on its index construction is now set to add SpaceX into the mix, adding it to some other mid-cap oriented companies because uh there’s there’s demand and it’s you want to have a broader portfolio of ETFs.

02:00 Speaker A

Do people have to worry about um concentration in the I mean like how big are these ETFs? Are, you know, is there any concern about risk, particularly when a SpaceX goes in, like it’s so big.

02:18 Todd Rosenbluth

Right.

02:19 Speaker A

You know, what’s the what’s the value of buying the ETF at all versus just buying SpaceX shares?

02:26 Todd Rosenbluth

So I, well we’re seeing it right now in that UFO to use that as a as our poster child for this is up 30% and it doesn’t hold SpaceX. So it’s not benefiting from any pre IPO of the of SpaceX itself. It’s just that investors are more interested in space in not only the exploration, but once once we get once it’s there, then how do you leverage it and utilize it. So there are a lot of companies that are already tied to that theme.

03:00 Todd Rosenbluth

I think the benefits of ETFs are going to ring true in that people will get exposure to small and mid-sized companies also. Many of these ETFs are not market cap weighted. Some of them will be and so we’ll see SpaceX be a dominant one, the same way that we see in certain artificial intelligence ETFs. You have Nvidia and Apple at the top and you’re getting similar exposure. Whereas an ETF like the Robo Global artificial intelligence ETF, more equally weighted spread with those small and mid-cap companies. So multiple ways to get a thematic exposure.

03:32 Speaker A

Yeah, that makes sense. And I guess there are there any space ETFs that are equal weighted so that even when space has come comes in, it won’t have that that big waiting?

03:42 Todd Rosenbluth

So I I keep using UFO because it’s the original one. It is an equal, well, it’s more equally weighted today because SpaceX isn’t part of it. SpaceX will be uh dominant, but we’ve seen other firms come to market. Global X has launched this a space ETF. Ark uh has an actively managed product and it’s as you mentioned, it’s a category many asset managers are focused on.

04:09 Speaker A

Yeah. Um, okay, I don’t want to run out of time. So I want to ask you about prediction market ETF, which is a somewhat uh controversial, I mean, prediction markets period are somewhat controversial. How do you even ETF-ize this? And is it a good idea?

04:33 Todd Rosenbluth

So, well right now we don’t have it, just to be clear. The SEC has not approved it. We’ve got filings that are happening from some firms that offer crypto related products or leverage products. So these are firms that are used to using the derivatives marketplace in some cases to get exposure. I think this is risky. I think I think that’s okay that it’s risky as people are as long as people are familiar with risk. We we saw single stock leverage ETFs. Uh, we saw the demand for them and now we saw the supply exceed that demand and there’s a handful of products from Direction and Granite shares among others that are having success and a lot of funds that are closing. So,

05:22 Speaker A

So the market takes care of it, basically.

05:24 Todd Rosenbluth

I think the market, I think the market will take care of it, but it’s important that investors understand the risks.

05:32 Speaker A

What what what is the risk?

05:34 Todd Rosenbluth

So, unlike a single stock leverage ETF, which could of course go up and down notably based on the underlying securities, I don’t think there’s much backing this. This is, you know, the prediction market as to which party’s going to win Congress or which party’s going to win the president. There’s no earnings, there’s no cash flow, there’s no anything that’s there behind it. So that’s the risk is that you’re making, it’s more of a bet than anything I think we have really in the ETF marketplace today.

06:10 Todd Rosenbluth

As long as investors are comfortable with taking that bet and the rules are there, okay. I…

06:17 Speaker A

Yeah. I don’t really understand the point of it, like if you can if you can invest in prediction markets, what’s the point of the ETF?

06:29 Todd Rosenbluth

So I that’s a good question and I mean ETFs have provided a liquidity and and pooling money together for opportunities and we’ve seen investors increasingly gravitate towards ETFs. So we had Bitcoin uh exposure and lots of other cryptocurrencies. Putting it in the ETF wrapper has made it available and easier for people. We’ll just see soon if easier is a good thing for investors or not.

07:01 Speaker A

Yeah, I mean and it’s not like prediction markets are particularly inaccessible right now. Right. Unlike Bitcoin which is a little bit more, historically was a little bit more complicated to get access to, but to your point, we’ll see. Um okay, before we leave you, I I guess you know, I’m looking at some of these other fast growing ETFs besides the space ETF. Infrastructure, which is not the sexiest area, but that’s seeing a big growth.

07:33 Todd Rosenbluth

It is. So boy, we’ll make a pivot here. So BNY Melon has a global infrastructure ETF that is approaching a billion dollars. It’s it’s doubled its asset base this year. So we are seeing investors, advisors look for income, stability and they’re getting it through a diversified manner through this that BNY ETF. So that’s we’ve seen income be a very popular theme. Uh Neos has had success with income strategies as well this year, uh some other funds that are probably lesser known to investors.

08:08 Todd Rosenbluth

Uh B&Y is is one of the funds that’s stood out to us.

08:14 Speaker A

Gotcha. So we’re going from much more traditional or the opposite, much less traditional, more thanks for uh rolling with the grab bag of different topics there. There’s just a lot going on in the ETF world.

08:26 Todd Rosenbluth

Happy to. There is. There’s, there always is. Thanks for having me.

08:29 Speaker A

Yes, we can pull on some different threads. Thanks a lot, Todd.