Behind the Ticker

In a recent episode of “Behind the Ticker,” Brett Eichenberger from Cohen & Company discussed the intricacies of auditing in the ETF and mutual fund industry. Eichenberger, based in the firm’s Cleveland office, has worked his way up over a 19-year career with Cohen & Company, which now audits over 1,800 registered funds, making it the fourth-largest auditor of registered funds in the U.S. and the second-largest in the ETF space. Eichenberger emphasized Cohen’s role in maintaining public trust through transparency and strict regulatory compliance, working with a range of investment products including ETFs, mutual funds, closed-end funds, and interval funds.

One of the central differences in auditing ETFs versus mutual funds, Eichenberger explained, lies in the valuation of securities. ETFs report returns on both NAV and market value bases, due to their trading on secondary markets, whereas mutual funds focus solely on NAV. Additionally, ETFs rely on authorized participants for capital activity through in-kind creation units, which introduces unique audit considerations, especially in managing the in-kind exchange of securities.

Eichenberger highlighted several key areas of focus in ETF audits, such as ensuring accurate valuation, particularly in complex portfolios that may include derivatives, foreign securities, or illiquid assets. For products like ETFs, Cohen & Company pays close attention to maintaining diversification standards and testing qualified income, which is essential for regulatory compliance. Eichenberger explained how Cohen’s audit teams perform regular assessments to verify all positions are accurately valued, confirming assets held in custody and ensuring that clients’ funds meet regulatory diversification requirements.

The discussion also touched on the impact of technology, including advancements in data-driven auditing that allow Cohen to move toward 100% testing of transactions, improving accuracy over traditional sampling methods. Eichenberger shared that the firm’s adoption of automation enables more efficient audits, allowing for better oversight and faster processing.

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In a recent episode of “Behind the Ticker,” Petra Bakosova from Hull Tactical discussed the unique approach behind the Hull Tactical Asset Allocation ETF, HTUS. Bakosova, who has been with Hull Tactical since its inception, has a background in applied mathematics and previously worked at proprietary trading firms. She explained that Hull Tactical’s investment strategy draws inspiration from founder Blair Hull’s background as both a blackjack card counter and a legendary options trader. Hull’s principles—making frequent, proportional bets based on advantage, and prioritizing risk management—form the backbone of HTUS’s tactical approach.

HTUS, launched in 2015, is a tactical asset allocation fund that aims to outperform the S&P 500 without exceeding its volatility. The fund combines data-driven market timing with quantitative models that analyze approximately 40 publicly available indicators. These indicators are organized into categories: macroeconomic factors, fundamentals, technical anomalies, and sentiment. The strategy is fully dynamic, adjusting S&P 500 exposure daily based on signals generated from these models. HTUS typically ranges from 50% to 150% exposure, though it has flexibility from fully invested to flat or even short.

A unique feature of HTUS is its daily rebalancing, a process that allows the fund to remain agile and responsive to market changes. Bakosova detailed that HTUS leverages SPY and E-mini futures for S&P 500 exposure and incorporates SPX options to adjust for market sentiment and volatility. The fund’s sentiment indicators include sources like MarketPsych, Halbert, and Ned Davis, which track social media and news sentiment. Bakosova highlighted the importance of diversification in HTUS’s modeling process, as each indicator provides different market insights over various time horizons.

HTUS is intended as a sophisticated, hedge fund-like strategy within an ETF structure, appealing to advisors seeking an alternative to traditional large-cap core holdings. Bakosova emphasized that Hull Tactical is focused on continual research and model refinement, with plans to incorporate more advanced AI and machine learning techniques.

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In a recent episode of “Behind the Ticker,” Joe Benoit, portfolio manager at Grimes & Company, discussed the firm’s collaboration with Little Harbor Advisors on their ETF, the LHA Risk Managed Income ETF (ticker: RMIF). Benoit, who began his career with Grimes, now oversees portfolio management and research for the firm. Grimes & Company, a Massachusetts-based RIA managing over $5 billion in assets, follows a holistic approach to client portfolios, integrating stock, fixed income, and alternative strategies. Grimes’s partnership with Little Harbor Advisors, known for tactical equity ETFs, stemmed from a mutual interest in providing a tactical fixed income solution, ultimately leading to RMIF.

RMIF, as Benoit explains, aims to generate consistent income while preserving capital and managing downside risk. This strategy originated in response to the post-2008 low-interest environment, as Grimes sought alternatives to traditional high-quality bonds. The ETF applies a fully tactical, unconstrained approach to fixed income, allocating based on positive price trends and yield. RMIF can shift entirely into areas like high yield, bank loans, or even cash, depending on market conditions. This flexible allocation model allows the ETF to adjust risk exposure as trends change, making it a versatile solution for income-focused investors.

Benoit details RMIF’s approach to asset allocation, explaining that it prioritizes ETFs offering the highest yield within the current positive trends. Currently, the portfolio includes five ETFs, with equal weighting, primarily focusing on bank loans and short-duration high yield bonds. The strategy is momentum-based, utilizing price trends, volatility assessments, and yield comparisons to determine allocations. In periods of heightened volatility, RMIF can de-risk quickly, shifting allocations to safer assets like short-duration Treasuries or cash.

Designed as an alternative to core fixed income, RMIF fits into portfolios as either a substitute for or complement to traditional bond investments. For advisors seeking “conditional credit,” RMIF’s ability to tactically adjust to market shifts provides a reliable source of income with an added layer of risk management.

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In a recent episode of “Behind the Ticker,” David Allen, CFA and founder of Octane Investments, discussed his background in finance and the firm’s strategy for its recently launched All-Cap Value Energy ETF (ticker: OCTA). Allen, who began his career in 1992 as a trader at Merrill Lynch and witnessed significant market events like the breaking of the Bank of England, developed a keen interest in geopolitics and energy markets early on. His experience spans institutional sales and trading, which later inspired him to start Octane Investments to capitalize on what he identified as a market gap created by divestment from traditional energy sectors.

Allen explains that Octane Investments was founded to take advantage of the “carbon risk premium” and other risk premiums inherent in the energy market, such as the equity risk premium, the small cap premium, and the value premium. The firm focuses on identifying undervalued companies in the energy sector, particularly those that are being overlooked or divested due to environmental concerns. OCTA, Octane’s All-Cap Value Energy ETF, is structured around an all-cap value strategy, investing in energy companies with stable earnings, strong balance sheets, and a commitment to returning capital to shareholders.

Throughout the conversation, Allen emphasized the significant opportunity in traditional energy sectors, despite the increasing focus on sustainability and renewable energy. He highlighted that many investors are avoiding energy stocks, leading to a scarcity of capital and undervalued opportunities in the market. OCTA seeks to capture this value by focusing on companies that are profitable, financially stable, and returning capital to shareholders, such as through buybacks and debt elimination. Allen explained that the fund’s holdings are curated based on a decision tree that screens for price-to-earnings ratios, balance sheet strength, and capital return strategies.

Allen also touched on how OCTA offers exposure to a range of energy subsectors, including refiners and tankers, and discussed how the fund’s structure mitigates risks by limiting exposure to any single company. The ETF is rebalanced weekly, and the portfolio includes companies from developed markets, avoiding exposure to non-OECD markets where political risks are higher. Allen sees OCTA as a strong complementary allocation for investors who are underweight in energy and stressed that, with energy representing less than 4% of the S&P 500, there is a structural underweight in the sector that his ETF addresses.

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In a recent episode of “Behind the Ticker,” Federico Brokate, Head of U.S. Business at 21Shares, shared insights into the firm’s approach to digital asset ETFs, including their products ARKB (Spot Bitcoin ETF) and CETH (Spot Ethereum ETF). Having joined 21Shares three months ago, Brokate brings a wealth of experience from his ten-year tenure at BlackRock, where he focused on U.S. ETFs. 21Shares, headquartered in Zurich, is dedicated to making digital assets more accessible through innovative products and has been rapidly expanding with over 50 products in 16 global markets.

Brokate explained that 21Shares was founded in 2016 with a clear mission to bridge the gap between traditional finance and digital assets. The company’s founders, inspired by their mothers’ interest in Bitcoin, realized there was no easy way for retail investors to access digital assets without understanding the complexities of wallets, keys, and encryption. This led to the creation of 21Shares’ digital asset ETPs, which now offer institutional-grade products in both Europe and the U.S.

Regarding the current digital asset landscape, Brokate highlighted the tremendous success of Bitcoin ETFs, noting that digital asset ETFs, including 21Shares’ ARKB, have become some of the fastest-growing ETFs in history. He emphasized the importance of educating advisors and clients, particularly in the wealth advisory and institutional spaces, where interest in digital assets is rising but knowledge gaps remain. He mentioned that a significant portion of digital asset ETF holders are retail investors, but interest from institutional investors and wealth advisors is growing steadily.

Brokate also discussed the operational aspects of 21Shares’ products, explaining that both ARKB and CETH utilize a multi-custodial model with custodians like Coinbase, Anchorage, and BitGo to reduce single points of failure and ensure robust operational security. He noted that 21Shares is the only issuer currently offering this level of transparency, allowing investors to verify the holdings of each product through a partnership with Chainlink, which provides proof of reserve technology. This transparency, combined with the firm’s experience in managing digital asset products, has positioned 21Shares as a leader in the space.

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In a recent episode of “Behind the Ticker,” Nancy Davis, founder and CIO of Quadratic Capital, discussed her journey from Goldman Sachs to launching her firm, as well as the innovative strategies behind her ETFs, including IVOL and BNDD. Davis, who founded Quadratic in 2013 after spending ten years at Goldman Sachs, explained that her entrepreneurial leap was driven by the desire to start something new, embracing the learning curve of building a business from scratch.

Quadratic Capital initially started with managing separate accounts and a hedge fund before entering the ETF space in 2018. Davis was intrigued by the ETF structure for its tax efficiencies and saw an opportunity to address gaps in traditional fixed income products like the Aggregate Bond Index (AGG) and TIPS (Treasury Inflation-Protected Securities). IVOL, Quadratic’s interest rate volatility and inflation hedge ETF, was designed to complement core bond holdings, addressing issues in the AGG such as its lack of inflation protection and embedded short optionality through mortgages. IVOL provides investors with exposure to TIPS and the rates market, offering inflation protection and interest rate volatility hedging, which is generally inaccessible to individual investors.

Davis explained that IVOL’s portfolio consists of about 80% TIPS and is structured to give investors access to inflation expectations beyond the consumer price index (CPI). By providing exposure to interest rate volatility through long options, IVOL helps mitigate risk in fixed income portfolios during periods of rising volatility or unexpected rate cuts, as demonstrated during events like the March 2020 market turmoil.

The conversation also touched on BNDD, Quadratic’s deflation-focused ETF, which is designed for long-duration exposure to nominal treasuries. Davis highlighted that BNDD offers asymmetric exposure to interest rates without the leverage risks that are prevalent in other bond market products. While IVOL addresses inflation risks, BNDD offers protection during deflationary periods, making both ETFs complementary tools for managing interest rate risks in a portfolio.

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In a recent episode of “Behind the Ticker,” Mike Venuto, co-founder and CIO of Tidal Financial Group, shared insights into the company’s approach to launching, growing, and operating ETFs. Tidal, a firm that has grown significantly over the years, now manages and supports over 160 funds with more than $19 billion in assets under management. Venuto, who has a background in ETFs dating back to his time at WisdomTree and Global X, highlighted Tidal’s unique platform that helps clients from initial idea generation to full-scale ETF operations.

Venuto discussed his hands-on role at Tidal, which involves structuring ETFs, managing active funds, and collaborating closely with clients to develop innovative products. A key focus of the conversation was on the breadth of Tidal’s capabilities, from handling compliance and legal matters to marketing and product development. The company prides itself on offering a comprehensive service, allowing ETF issuers to focus on managing their portfolios while Tidal handles the operational complexities.

One of Tidal’s standout achievements is its ability to launch ETFs quickly and affordably, compared to the traditional process. Venuto explained that while starting an ETF independently can cost hundreds of thousands of dollars and take up to nine months, Tidal can often bring funds to market in under four months at a fraction of the cost. This efficient process, combined with the firm’s expertise in complex strategies such as options, derivatives, and leverage, has allowed Tidal to grow rapidly, especially in the active ETF space, which has seen significant demand.

Venuto also touched on trends in the ETF market, including the growing interest in active strategies, single stock ETFs, and the potential for mutual fund-to-ETF conversions. He noted that while mutual fund conversions have been slow, the demand for more tax-efficient ETF structures continues to rise. Additionally, Venuto emphasized that Tidal only partners with clients who have strong, viable product ideas, ensuring that the firm maintains a low fund closure rate and helps clients succeed in a competitive market.

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In a recent episode of “Behind the Ticker,” Sylvia Jablonski, CEO & CIO of Defiance ETFs, shared her background in finance and the innovative strategies driving the firm’s success. Jablonski, who has a rich history in sales & trading and a decade of experience with ETFs, decided to join Matt Bielski to help launch Defiance, a company that aims to create ETFs targeting cutting-edge themes. Over the last four and a half years, Defiance has grown significantly, expanding its product lineup to include thematic, income, and leveraged ETFs.

Jablonski discusses the firm’s thematic approach, with a special focus on their quantum computing ETF, QTUM. Launched in 2018, QTUM was ahead of the curve in recognizing the potential of quantum computing, artificial intelligence, and machine learning. Jablonski explains that Defiance worked with Bluestar to construct an index that includes the top companies in quantum computing and AI, from major players like IBM and Hewlett-Packard to smaller, pure-play names like IonQ and D-Wave. The fund offers investors diversified exposure to the key sectors driving these transformative technologies.

The QTUM ETF targets companies that derive at least 50% of their revenue from supercomputing, machine learning, and AI. The fund holds around 70 equally weighted names and is rebalanced semi-annually, providing exposure to both large and small-cap companies. This includes established tech giants like Nvidia and Google, which act as a ballast for the fund, while also capturing the potential high growth of emerging players in quantum computing. Jablonski highlights that quantum computing’s ability to process data exponentially faster than traditional computers can revolutionize industries such as biotech, aerospace, and defense, making QTUM a powerful thematic play for long-term growth.

In addition to discussing QTUM, Jablonski touches on the overall strategy at Defiance, emphasizing the importance of speed, adaptability, and listening to market demands. She explains that Defiance’s ability to be nimble and respond quickly to trends has been key to their success. The firm has also built an in-house marketing and distribution platform, leveraging AI and digital marketing to efficiently promote its ETFs. This unique approach has allowed Defiance to punch above its weight, attracting attention in a competitive market without the extensive budgets of larger issuers.

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In a recent episode of “Behind the Ticker,” James St. Aubin, Chief Investment Officer of Ocean Park Asset Management, shared insights into his firm’s approach to managing risk and growing client assets. With over two years at Ocean Park and a background that includes stints at Smith Barney, Wilshire, and Ibbotson Associates, St. Aubin has extensive experience in asset allocation and portfolio construction. He explains that Ocean Park’s core philosophy, dating back to its founding in the mid-1980s, is focused on downside protection and mitigating exposure to left-tail risk, particularly for retirees or those nearing retirement.

Ocean Park offers a range of solutions, including four ETFs, eight mutual funds under the Sierra brand, and packaged fund strategist portfolios for advisors. The firm’s investment strategy revolves around quantitative trend-following techniques, using banded moving averages to identify buy and sell signals in its target markets. This methodology, which emphasizes capital preservation by limiting exposure to market downturns, is particularly important for investors seeking to avoid large losses during volatile periods.

The discussion also centered on Ocean Park’s recently launched ETF, DUKQ, which focuses on U.S. domestic equities. St. Aubin explains that DUKQ applies the same quantitative, trend-based approach as the firm’s other strategies, investing in ETFs that cover a broad range of market exposures, including small cap, mid cap, and factor-based strategies. DUKQ holds around 10 to 12 ETFs when fully invested and has the ability to move entirely to cash during market sell-offs if all assets signal a downturn.

One of the key advantages of DUKQ, according to St. Aubin, is its ability to protect against extreme market events while still participating in market gains. The ETF can redeploy capital to other sectors if certain segments trigger a sell signal, rather than immediately moving all assets into cash. This flexibility ensures that the fund remains actively managed, with turnover averaging around two trades per year.

As ETFs become a more critical part of Ocean Park’s overall offering, St. Aubin emphasizes the importance of meeting advisor demand for these products. The firm’s decision to launch ETFs, including DUKQ, was driven by the growing preference for ETFs among advisors due to their tax efficiency and ease of use. St. Aubin believes that ETFs, along with the firm’s mutual funds and managed portfolios, provide advisors with flexible, tactical tools to manage client risk and return.

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In a recent episode of “Behind the Ticker,” Springer Harris, the author of Get ETF’d: An Insider’s Guide to Starting and Running an ETF, shared his extensive experience in the ETF industry and the inspiration behind his book. Harris, who has spent his entire career at Teucrium, initially entered the finance industry without even knowing what an ETF was. After a brief stint in corporate PR, he found his passion for ETFs and has spent over 14 years as a portfolio manager and chief operating officer at Teucrium. As he engaged with aspiring ETF creators over the years, Harris found himself answering the same questions about launching and managing ETFs, which ultimately led him to write his book as a comprehensive guide for future ETF entrepreneurs.

Harris explains that Get ETF’d is aimed at educating asset managers and entrepreneurs about the intricacies of launching an ETF. His book walks readers through the entire process, from understanding industry terminology to selecting the right service providers, regulatory structures, and marketing strategies. He emphasizes the importance of planning, particularly the need for a three-year business plan to ensure the sustainability of a new ETF. Harris stresses that simply launching an ETF is not enough—entrepreneurs must be prepared to invest in marketing, build their brand, and stay committed for the long haul.

One of the key insights Harris provides is the distinction between different paths to launching an ETF. He discusses the advantages and drawbacks of building your own ETF business, partnering with a white-label provider, or creating a hybrid approach. While white-label solutions offer a faster and more cost-effective way to launch an ETF, they also come with trade-offs in terms of control and profitability. Harris advises entrepreneurs to evaluate their long-term goals and business plans before deciding which path to take.

Throughout the conversation, Harris emphasizes the importance of perseverance and adaptability in the ETF industry. He acknowledges that not every strategy will succeed, and closing an ETF can be a difficult but necessary decision. However, he encourages entrepreneurs to view such setbacks as learning experiences and to remain focused on their long-term vision. For more information on Harris’s book and his insights into the ETF industry, readers can visit his website at howtostartanetf.com or connect with him on LinkedIn.

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