2 NightShares ETFs Close After Struggling to Gain Traction

2 NightShares ETFs Close After Struggling to Gain Traction

CEO said firm got ‘colossally unlucky’ with timing of fund launches.

LucyBrewster310x310
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Finance Reporter
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Reviewed by: Lisa Barr
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Edited by: Lisa Barr

NightShares, the investing firm that aims to take advantage of after-hours gains in the stock market, is closing two of its first ETFs in August.  

The funds, the NightShares 500 ETF (NSPY) and the NightShares 2000 (NIWM), will halt trading this month and will liquidate Aug. 10. The funds have been floundering since they launched last June—NSPY only brought in $3.7 million and NIWM only $1.4 million.  

NSPY is down 3%, while NIWM is down 6% during the past year, versus about a 15% gain for the S&P 500, according to etf.com data. Its investment advisor, AlphaTrAI Funds, recommended the firms shutter the ETFs, according to a filing with the SEC.  

The ‘Night Effect’ 

The funds aimed to take advantage of the “night effect.” That is the phenomenon that some stocks tend to perform better overnight than they do during the day because news such as earnings announcements are often released after market hours. The notion that buying at market close and selling the next day can bring higher returns has been supported by research, but executing a fund with this strategy has proven complex.  

The actively managed ETFs both use futures to incorporate overnight gains from the U.S. stock market. Although the firm pioneered a unique strategy, the funds failed to gain traction after launching. 

NightShares CEO Bruce Lavine told etf.com that the lackluster reception from investors was due to “colossally unlucky” timing. When the funds launched last June, the market immediately entered a period where gains during the day surpassed those of the overnight’s. He said operating costs weren’t a factor in the funds’ failures.  

“It just turned out that the day has been performing well of late and certainly better than the historical period that we've seen,” Lavine said. “Advisors are finding it a bridge too far to be totally out of the market during the day.” 

NightShares still operates a leveraged fund, the NightShares 500 1x/1.5x ETF (NSPL), which has performed far better than NSPY and NIWM since its October launch. Lavine explained that this fund also incorporates gains from the daytime, which he credits for its comparative success. Year to date, it has gained 17% and has brought in $15 million in assets, according to Bloomberg. Yet compared to the S&P 500’s gain of 19% over the same period, it is still underperforming.  

Lavine still believes in the concept of taking advantage of overnight gains and sees the ETF closures as a redirection for the firm. He noted that a new fund called NightShares Select will be launched in the fall. It will still use after-hours gains while also incorporating daytime market gains, which he sees as a more palatable strategy to investors. The new fund will also incorporate artificial intelligence, which is a new feature for the firm’s funds.  

 

Contact Lucy Brewster at [email protected] or on Twitter at @lucyrbrewster   

Lucy Brewster is a finance reporter at etf.com covering asset managers, emerging technologies, and regulation. She hosts etf.com webinars and appears on Exchange Traded Fridays, etf.com’s flagship podcast. She previously was a finance fellow at Fortune Magazine where she covered markets, investment strategy, and venture capital. She has also been a freelancer writer at the publication Mergers & Acquisitions and a research fellow at the Historic Hudson Valley. 

She graduated from Vassar College in 2022 with a degree in History and was an editor of The Miscellany News, the college's award winning student run newspaper. 

Lucy lives in Brooklyn, NY, and in her free time she loves to run and find new recipes to cook.