Given the dominance of BlackRock and Vanguard, not only in fixed income, but in the ETF industry itself, how does VanEck stand out? Van Eck says there are two ETF industries: core exposure at very low prices, and everything else.
He says that 80% of the industry by assets is made up of ETF issuers offering core exposure: “We’re in a second industry. I’d say we’re trying to offering interesting exposures for people’s portfolios. And we have to earn our place. Hopefully we’ll survive.”
VanEck is expanding internationally, with a family of UCITS ETFs and an ETF business in Australia, where it has about 5% of market share. It also has license to operate in China, an initiative van Eck says will take a few years to pay off.
Delving Into Bitcoin
With regard to the proposed bitcoin ETF, Jan van Eck says some of the SEC’s concerns center around market manipulation due to misleading statistics regarding market liquidity.
To assuage those concerns, van Eck says its index comprises prices sourced from three market makers used by hedge funds. Regarding bitcoin custody—another concern since digital wallets containing bitcoin have been stolen—the filing with SolidX also includes insurance for the losses of assets.
“We’re talking with the regulators and getting us all comfortable with the structure of this new market,” van Eck said.
Bitcoin is a natural fit in the issuer’s lineup, van Eck said, “which is why we almost had to launch it.”
The concept of bitcoin is similar to digital gold, in that it has no counterparty risk, van Eck says. If there were some financial system stress or a jump in inflation because of a debt crisis, investors might gravitate to bitcoin like they do gold. He notes that it probably appeals more to millennial investors than older investors.
Even though the late-2017 fervor around bitcoin has died down, van Eck says he sees some “rays of sunshine” in terms of commercial adoption, such as payment company Square allowing people to use bitcoin.
“This is something where a very mainstream company is using bitcoin,” he noted. “Bitcoin hasn’t gone away; it’s just taken a while for it to be integrated into other products.”