Finding the ESG angle in YOLO and VICE
AdvisorShares is an actively managed ETF provider, offering a range of thematic funds that employ a wide range of strategies. Its VEGA fund, for example, is a ‘low volatility, moderate risk, global balanced portfolio that strategically allocates to the capital markets’, while its HDGE ETF is sub-advised by Ranger Alternative Management and seeks ‘capital appreciation through the short-sales of domestically traded equity securities.’
AdvisorShares also offers more niche themes – and some perhaps controversial. Its Hotel ETF (BEDZ) invests in the hotel industry, EATZ in restaurants and its YOLO fund became the first actively managed ETF with a dedicated cannabis investment mandate domiciled in the US when it launched.
Then there is the VICE ETF, which ‘invests in the products and services that people find pleasure in regardless of economic conditions,’ according to the fund profile on the AdvisorShares website. It seeks long-term growth from ‘select global companies operating in ‘vice’ industries’ including alcohol, tobacco, gaming, food and beverage, restaurant and hospitality, or ‘other vice-related business activities.’
Noah Hamman, CEO of AdvisorShares, talks to IR Magazine about going beyond the quarterly fact sheet, fund manager videos and attracting the millennial crowd.
What are your current assets under management?
We have $2.2 bn in assets under management across 22 ETFs.
Your website states that ‘the mission of AdvisorShares is to innovate not only our products but also how we service and communicate to our shareholders’. Can you tell me about this servicing and communication with shareholders?
We have always strived to be more than just quarterly fact sheets and commentary. We were one of the early asset management firms to use social media, original video content and live and direct engagement with portfolio managers. [Each fund profile features a short introduction video from the fund manager].
You also talk about making ‘subtle changes’ to the ETF model. Can you expand on that?
We originally offered only strategies with sub-advisers. Over time, as we have grown, we continue to offer strategies run by sub-advisers but now also offer ETFs based on third-party models via licensing and manage our own internal proprietary strategies.
In a time when ESG investing is never out of the news, you’ve got ETFs called VICE and YOLO. How do the two line up?
Well, without getting into the debate of what is truly ESG, which I think means different things to different people, I can say you will find some important ESG attributes in many companies considered ‘vice’. For example, Anheuser-Busch has a 99.8 percent recycling rate and 100 percent of its purchased electricity comes from wind and solar power. So we believe people should invest in their passions, in companies whose products they use and that they believe provide them with the best investment opportunity.
A number of your thematic ETFs appear to be targeted to millennial or Gen Z interests. Can you tell me more about these funds and the type of investors attracted to invest in them?
Certainly, our two cannabis ETFs fit that description, though we built them because we believe in the investment opportunity. Thankfully, financial advisers and investors of all ages in US states that have provided early legalization – including Colorado, Oregon and California – are invested in those ETFs.
That said, we do see more self-directed investors in those ETFs as advisers continue to conduct more due diligence and become better educated on not only the potential social and medical benefits of cannabis, but also what we believe to be one of the best investment categories of the next decade.
Do you vote your proxy?
We use ISS proxy adviser services.
You have ETFs listed on both the NYSE and Nasdaq. How do you decide which exchange to list a fund on?
Sometimes there are specific reasons we will list a product on a particular exchange but our goal in general is to have a blend of relationships. We learn a lot from our business partners, so we are happy to continue to diversify the providers of these services and continue to grow our services and capabilities with them.
Do you have a typical holding period?
Not a ‘typical’ holding period. While we would love to hold a stock forever, depending on the ETF strategy, our managers will make holdings adjustments when they believe better investment opportunities are presented, as well as make exposure adjustments when an investment or the market is demonstrating signals of being overvalued.
Can you tell us about your biggest and smallest holdings?
Our largest holding is Green Thumb Industries, a US multi-state operator in the cannabis industry, in both our US Cannabis ETF and our Global Cannabis ETF. Our smallest holding is Dave & Buster’s, though not our smallest conviction: it’s only a smaller holding because it is in our recently launched Restaurant ETF.
Can you tell us about some of your favorite holdings at the moment?
Both stocks mentioned above are great examples of our favorite holdings. Green Thumb is one of the more successful companies in the US cannabis space, led by an outstanding management team. As previously mentioned, we believe cannabis could be one of the best investment opportunities of the next decade, though it will likely come with some volatility as it is an emerging space with a lot of federal and state regulatory hurdles ahead.
Dave & Buster’s is part of our Restaurant ETF and represents the reopening trade. While the reopening process – with Covid-19 variants moving around the globe – will not be a smooth process, we see demand for a return to normalcy. We believe we will get there and could see an environment similar to the roaring 1920s. In addition, we launched the Hotel ETF to capitalize on this trend in the hotel and cruise industry.
How do you overcome challenges around communication as an ETF provider?
This is the challenge with the ETF space – it’s hard for us to know our investors, so we try to communicate often and broadly via web, email and social. We try to ensure information and insights are as easily available for our investors as when they select a show to watch on Netflix.