On this week’s episode of ETF Prime, host Nate Geraci was joined by Cinthia Murphy, a VettaFi investment strategist and VettaFi Voice. Murphy and Geraci discussed alternative ETFs and the state of spot ether ETFs, among other topics. Later, Bloomberg Senior ETF Analyst Eric Balchunas and Van Buren Capital General Partner Scott Johnsson joined Geraci to evaluate the SEC’s pivot on spot ether ETFs.
SEC Confidence
To start, Geraci asked Murphy what her thoughts were on the SEC’s surprising approval of spot ether ETFs. Murphy noted that she felt “a little bit of a sense of relief” knowing that the approval process was not a “long haul” like it was for spot bitcoin ETFs. However, Murphy noted her disappointment that the approval may have been politically motivated.
“When we think about just the process of ETF approvals and the process of product innovation and improving market access — those are all great things. You know, noble causes, if you will. And when you hear that it can be such a 180 pivot on something that’s important for political motivation, [it] kind of dents our confidence in the whole thing, and maybe even some of the credibility of the SEC,” added Murphy.
Are Spot Crypto ETFs an Alternative Strategy?
Transitioning to a discussion on alternatives, Geraci asked Murphy if she believed spot bitcoin and spot ether can be considered alternative ETFs. Murphy asserted that she believed so. She noted that alternatives is a “broad umbrella” encompassing investment strategies that are not “plain equities, plain bonds, or cash.”
Following up, Murphy observed that the alternative nature of spot crypto ETFs can be why the asset is not more broadly added to portfolios. “I think that’s also something that keeps that adoption one step removed from just being in everybody’s portfolio too. It takes a little more due diligence, a little more figuring out how it fits within broader allocations,” Murphy observed. Murphy then cited recent VettaFi polling that found a wide percentage of advisors held cryptocurrency in either a negative or noncommittal light.
Alternative Momentum
Moving on to the broader field of alternatives, Geraci noted a recent article from Murphy highlighting the growing optimism behind alternative strategies. She noted this is partially due to the unique nature of alternative ETFs and how the different funds end up in the same category. Murphy added that some say alts are growing due to increased accessibility to liquid assets. However, she said the alt momentum illuminates the market environment. She then added that alts can help investors who are looking for “noncorrelated assets to diversify exposures.”
Following up on the state of the market, Geraci observed that stocks are doing quite well at the moment. However, Murphy noted that while investors are chasing growth, many are prioritizing value and quality as well. She noted that value and quality demand suggests “people are getting a little bit nervous about where stock valuations are, especially in the growth names.” As additional examples of market uncertainty, Murphy cited the shifting expectations for 2024 rate cuts and the upcoming U.S. presidential election.
Upcoming Alternatives Symposium
Rounding out the alternatives discussion, Geraci noted that VettaFi has an upcoming Alternatives Symposium on Thursday, May 30. He asked Murphy if she thinks that investors and advisors both could benefit from more education in navigating the alternative investment space. She agreed. Murphy went on to note that while some firms have done a great job explaining alternative products to customers, more education can be beneficial for both advisors and investors. In the upcoming symposium, Murphy highlighted that the wide range of panelists will break down where alternative strategies can fit into a portfolio.
Spot Ether Approval
To close out this week’s podcast, Geraci then spoke with Eric Balchunas, Bloomberg senior ETF analyst, and Scott Johnsson, general partner at Van Buren Capital. Geraci asked both Balchunas and Johnson what their thoughts were on the SEC’s sudden decision to approve spot ethereum ETFs.
Balchunas and Johndson said they were both caught off guard by the SEC’s sudden approval for spot ether. Evaluating why the SEC decided to pivot, Balchunas asserted the decision may have partially been because crypto increasingly becoming an election issue. Johnsson agreed, highlighting that the SEC still seemed to recently be debating whether ethereum was a security or not. Balchunas added that if the SEC had denied spot ether, it would “just add to the anti-crypto narrative” ahead of the U.S. presidential election.
Listen to the entire episode of ETF Prime, featuring Cinthia Murphy, Eric Balchunas, and Scott Johnsson:
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