New ETF Targets Companies Poised for Deregulation Relief
- FMKT is the first fund designed to capitalize on companies benefiting from free market regulatory shifts.
- The ETF uses AI-driven screening to identify firms discussing regulatory relief opportunities.
- Its portfolio includes energy, healthcare and financial services companies facing high compliance costs.
Tidal Investments on Monday launched The Free Markets ETF (FMKT), which the firm calls the first exchange-traded fund designed to invest in companies expected to benefit from deregulation trends across multiple sectors of the U.S. economy.
The actively managed fund targets U.S.-listed equity securities of companies that sub-advisers believe will profit from regulatory environment shifts supporting free market dynamics, according to the fund's prospectus.
The launch comes as federal regulation costs an estimated $2.1 trillion annually, or about $15,000 per U.S. household, creating what fund managers describe as an enormous drag on business productivity and profitability, Michael Gayed, portfolio manager for Tactical Rotation Management, one of the fund's sub-advisers, said in a press release announcing the launch.
FMKT Harnesses AI
FMKT uses an artifical intelligence-driven screening system that reviews regulatory databases, company filings and earnings calls to find firms discussing regulatory relief opportunities in real-time, according to the press release. This approach combines with financial analysis focused on key metrics.
"There is currently no other ETF in the U.S. marketplace that specifically targets the deregulation theme," Hal Lambert, portfolio manager at Point Bridge Capital, said in the release. "By focusing on companies with high regulatory cost sensitivity across sectors like healthcare, financial services, and energy, we aim to identify opportunities where margin expansion and operational improvements can drive outperformance."
The fund's current portfolio shows this strategy, as top holdings include energy companies like Uranium Energy Corp. (UEC) at 4.2% and EQT Corp. (EQT) at 2.9%. Healthcare holdings include McKesson Corp. (MCK) at 3.9% and Ensign Group Inc. (ENSG) at 2.9%. Financial services holdings include Interactive Brokers Group Inc. (IBKR) at 2.9% and CME Group Inc. (CME) at 2.8%.
The ETF's strategy addresses the regulatory burden faced by U.S. companies, with research showing that businesses spend tens of thousands of dollars per employee each year on regulatory compliance, according to the release. Manufacturing firms face costs averaging over $50,000 per employee each year.
Portfolio Strategy and Holdings
The fund holds around 25 to 50 positions and can invest in companies of any size, according to the prospectus. Current holdings span from large-cap companies like NextEra Energy Inc. (NEE) at 3% to smaller firms like CorVel Corp. (CRVL) at 2.9%.
The fund also includes exposure to digital assets through the iShares Bitcoin Trust ETF (IBIT), which makes up 4.1% of holdings, and SPDR Gold MiniShares Trust (GLDM) at 3%, according to fund holdings data. The prospectus allows for up to 5% investment in exchange-traded products providing Bitcoin or Ether exposure.
The Free Markets ETF charges an expense ratio of 0.75%, according to the fund's online description. The fund is sub-advised by SYKON Asset Management, Point Bridge Capital and Tactical Rotation Management, and trades on NYSE Arca.
