Finance
Hedge against political cycles is better investment than AI: Van Eck
A major exchange-traded fund and mutual fund manager finds the winning gold trade isn’t talked about as much as the artificial intelligence trade — but maybe it should be.
VanEck CEO Jan van Eck thinks the best investment this year is “the hedge against political cycles.” To him, that means investing in gold.
“It is quietly the best performing asset this year,” Van Eck told CNBC’s “ETF Edge” from the Future Proof conference in Huntington Beach on Monday.
Gold hit another record on Friday, its 37th record this year. As of Friday’s market close, it is up 28% since the start of the year.
Van Eck, whose firm runs the VanEck Gold Miners ETF, expects foreign investments in bullion will continue to give the commodity a boost. It should also help in lifting gold miners higher, which started the year lagging the commodity. But as of Friday, the VanEck Gold Miners ETF has started to outperform, up 31% this year.
“I think you own both because the miners, if they catch up at all, it’s going to rip,” he said.
As for the AI trade, van Eck says it’s “amazing” how investors refuse to give up on it.
“It’s like part of people’s model portfolios, or core portfolios, is to have this tactical overweight to semis. And some of our biggest clients actually bought on the dip over the last week or two,” the VanEck CEO said.
Last month, his firm launched the VanEck Fabless Semiconductor ETF. It’s a companion to its VanEck Semiconductor ETF that excludes companies that run their own foundries, such as Intel.
FactSet reports the new ETF’s top holdings as Nvidia, Broadcom and Advanced Micro Devices as of Friday.
“Why spend billions of dollars on building the chips if you don’t have to?” van Eck said. “Nvidia doesn’t build its own chips. So that’s another kind of investment strategy.”
Since launching on Aug. 28, the VanEck Fabless Semiconductor ETF is up a half percent.
It appears T. Rowe Price is benefitting from the record growth in actively managed exchange traded funds.
Tim Coyne, the firm’s head of ETFs, reports the firm is seeing significant growth in the area — listing the T. Rowe Price Capital Appreciation Equity ETF (TCAF) and T. Rowe Price U.S. Equity Research ETF (TSPA) as two established strategies that can satisfy investor demand.
“I think having that professionally managed portfolio is really beneficial to clients,” Coyne told CNBC’s “ETF Edge” this week. “We’re seeing just… greater volatility [and] uncertainty across both the equity and fixed income markets.“
According to Coyne, the T. Rowe Price Capital Appreciation Equity ETF suits investors who are looking for long-term growth.
“The objective of the fund is to outperform the S&P 500 with lower volatility and greater tax efficiency,” he said. “It’s also a more concentrated portfolio, typically holding around a hundred names.”
As of April 24, the fund’s top holdings include Microsoft, Amazon, and Apple according to the T. Rowe Price website. But it’s not all Big Tech. The ETF also features smaller positions in companies like Becton Dickinson and Roper Technologies.
The T. Rowe Price Capital Appreciation Equity ETF is down about 5% so far this year while the S&P 500 is off about 7% However, the ETF is up close to 8% over the past year — roughly identical to the S&P 500’s performance.
Coyne notes the T. Rowe Price U.S. Equity Research ETF follows a similar strategy, but with a heavier weighting in top tech stocks.
“This is more of a large-cap growth product [T Rowe Price U.S. Equity Research ETF],” he said. “There are components of characteristics of both passive and active here. This fund is actually managed by our North American directors of research. So again, strong fundamental research is going into the stock selection.”
Both the T. Rowe Price U.S. Equity Research ETF and S&P 500 are down around 7% since the beginning of the year. Meanwhile, the fund is up almost 9% over the past year. That’s less than one percent better than the S&P 500’s performance.
T. Rowe Price U.S. Equity Research ETF vs. S&P 500
‘Some form of bear market’
Strategas Securities’ Todd Sohn thinks investment demand for active managers will continue to be strong.
“This is the type of the environment where it [active management] can actually shine,” the firm’s senior ETF and technical strategist said. “We are in some form of bear market. This is where the active manager really can come into hand and offer their solution they are doing right.”
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