Private Assets, Public Access: Don’t Be the Bag Holder

Edward Lopez, Head of Product Management at VanEck, digs into the firm's alternative approach to private equity investing, why it's not too late to invest in gold, and what's on the horizon for crypto investors. 

Transcript

Opening: Investors Behind the Curve on Gold

Nadig: Here we are with gold having had a pretty good run. How has that impacted your business? Are you getting a lot of interest from advisors on some of those strategies?

Lopez: Well, believe it or not, not a lot. People have been disappointed by the miners and the gold complex for such a long time, they're just kind of behind the curve on this one.

Private Equity Investing Done Differently

Nadig: Dave Nadig, ETF.com. I'm here with Ed Lopez, Head of Product at VanEck. Ed, I've been super critical about trying to wedge private equity, private credit, private assets of any kind into ETFs, because the wrappers don't make a lot of sense sometimes. You guys have a different approach to trying to get some exposure to the action going on in private markets. Talk to me about that – convince me.

Lopez: Yeah, if you can't beat them, join them kind of thing, you know? This June we launched the VanEck Alternative Asset Managers ETF. It allows investors to participate in the growth of private investing with the public equities of the managers managing the fund. So, the GPs – the ticker symbol is GPZ, GPs. And it provides exposure to those big brand-name private managers, KKR, Brookfield, Blackstone, of the like. And it's really been a hit so far this summer. We're about 60 million in flows already, or in assets, and I think it's such a great story.

We've had a lot of advisors come to us and talk about wondering about the efficacy, just like you are, of their private investments. And so, this has really started to resonate with them as they evaluate. The managers actually tend to do really well because they continue to earn fees, where the LPs, depending on who you go with, you have to be very selective, obviously, are just getting okay returns. And maybe not the returns that they really expected from that kind of investment.

Why a Focus on Private Equity Managers Makes Sense

Nadig: All right, let's dig under the weeds here a little bit. So, a general partner in one of these things, like a KKR, just as an example, they make money a couple different ways. But one of the ways they make money is when their limited partnerships make money, the ones that they run. They get a carry, right? So that’s part of the angle . You’re actually getting some of that actual private exposure by buying this public vehicle. Is that, am I getting that right?

Lopez: Yeah, you get some of that exposure. You know, one of the issues right now in the whole private space is there’s not been a lot of exits. So, maybe they're not getting quite the carry yet, because I think that happens on the exits. But, as those assets still stay there, they still earn money on the fees – that 2% fees –and still generate money on those assets until they can get redeployed.

Nadig: So, as we start to see the actual private assets get into the public wrappers more and more, you'd actually kind of expect the bag holding part of that, which is what I've been critical about, to be at the benefit of the GPs here, right?

Lopez: Exactly. Yeah, right. And that's our play there. And it was amazing. This is a perfect example of working with our clients. Somebody, an advisor, brought us that idea, and it was like, "How come nobody's thought about this before?" And I think the thing is, a lot of these companies were LPs before, which made it really tax-efficient to put an ETF. But over the last decade, they've been converting to C-corps, and now we're able to allocate those into a portfolio, and there you go.

Gold: It’s Not Too Late To Jump In

Nadig: I'm going to change the subject here on you. You guys are pretty well known for being one of the first gold shops on the street. I mean, I started working with Jan Van Eck and Derek back in the day in the '90s, and that was a big part of the push: this access to gold, access to gold miners, different strategies. Here we are with gold having had a pretty good run. How has that impacted your business? Are you getting a lot of interest from advisors on some of those strategies?

Lopez: Well, believe it or not, not a lot. You know, in fact, you know, gold is up or the miners are up almost like 90% year-to-date. And I think we actually saw outflows out of GDX. But we think that that's probably short sellers covering their shorts. And we're only beginning to see some trickles of interest in the miners, for instance.

I think people have been disappointed by the miners and the gold complex for such a long time, they're just kind of behind the curve in this one. But, it’s – we're fortunate to be, have a diversified portfolio. So, GDX in and of itself is just one part of our whole suite. But we think there's room to run there. It plays into the whole de-dollarization theme and what's going on globally. So, I think there's still opportunity for people to look at gold and gold miners.

“Digital Gold”, Blockchain, and What's Ahead for Investors

Nadig: And then, of course, we've got the “digital gold” part of this digital asset, which you guys have had a phenomenal team on. What can investors expect from you going forward in the digital asset space? You're absolutely innovators there, lots of product people are talking about here. What's new? What's going to be fun?

Lopez: You know, go to our website, look at some of the private stuff that we actually have going on there. We're going to look at more tokens to do as well. We filed for some of those. We recently launched an actively managed ETF; it's our OnChain Economy ETF. It provides investors exposure to those companies benefiting from access to the blockchain. So, it could be companies that are like the crypto exchanges, but even broader than that, other companies that have adopted blockchain technology to their benefit. And it uses bitcoin and bitcoin beta to be, as kind of a signal to kind of move in and out of certain sectors and certain stocks.

Nadig: So, kind of a pick and shovel play just like you guys are known for in the gold space?

Lopez: Yeah, exactly. Exactly.

Nadig: All right. Well, Ed, it's great catching up with you. Thanks so much.

Lopez: Thank you, Dave. I appreciate it.