Tidal Trust Files With SEC for 2 New ‘Animal Spirits’ ETFs
Tidal Trust has filed for two funds, ANIM and WILD, that would add to the growing leveraged exchange-traded fund market.
In a Tuesday filing to the Securities and Exchange Commission, Tidal Trust requested to list the VistaShares Animal Spirits Strategy ETF (ANIM), an actively managed ETF seeking capital appreciation by investing in companies that are the primary focus of the largest and fastest-growing single-stock leveraged ETFs.
The firm also requested to list the VistaShares Animal Spirits Daily 2X Strategy ETF (WILD), which seeks daily investment results that correspond to two times the daily performance of an actively managed group of “animal spirits” securities.
The securities in both funds will be selected by sub-adviser VistaShares Advisors and based on the BITA VistaShares Animal Spirits Index.
Growth of Leveraged ETFs
Tidal and VistaShares were not able to comment directly on the filing due to regulatory restrictions. But Gavin Filmore, chief revenue officer at Tidal Financial Group, told etf.com that there is massive opportunity in and around the leveraged ETF space right now and that the firm is seeing a rapid rate of innovation from its partners and the broader market.
The more than 280 leveraged ETFs in the U.S. market have garnered $105.5 billion total assets under management.
“Managing these products is complex,” Filmore said. “Issuers need to ensure they have the right specialized and experienced partners in place.”
Risks of Leveraged Synthetic ETFs
Leveraged synthetic exchange-traded funds can amplify returns, but not without risk. Investors should not treat leveraged synthetic ETFs as passive long-term holdings, as they might with traditional ETFs, Rob Kane, director of alternative investments on the Investment Management and Research team at Commonwealth Financial Network, told etf.com.
“A common misconception is that these ETFs simply double or triple the performance over an investor's holding period,” Kane said, speaking of these types of ETFs in general and not a specific fund. In reality, he added, they are designed to replicate a leveraged daily return before fees and expenses of a specified security or index.
“Since performance is only guaranteed on a daily basis, the effect of compounding can introduce significant performance dispersion relative to the underlying reference asset over time,” Kane added. “Such dispersion and potential performance decay can be exacerbated in volatile markets with frequent price fluctuations.”
