Following a filing with the US Securities and Exchange Commission (SEC) on 8 June regarding the Rogers AI Global Macro ETF (BIKR), investors are waiting for additional confirmation of details such as a launch date for a product that joins legendary investor Jim Rogers – co-founder of the Quantum Fund along with George Soros in the 1970s – and ETF Managers Trust – the ‘Registrant’ listed in the SEC filing (https://www.sec.gov/Archives/edgar/data/1467831/000089418918003300/etf-rogersai_485b.htm#RogersAIGlobalMacroETFFunPRO).
The ETF, for which ETF Managers Group LLC is listed as the ‘Advisor’, uses the Rogers AI Global Equity index as its benchmark, and bases its return projections listed in the SEC filing on a management fee of 0.75%, with total annual fund operating expenses listed as 1.18%.
Managers of the ETF are listed in the SEC filing as: Samuel R. Masucci, III, CEO, and CIO of the advisor, James B. Francis, senior portfolio manager, and Devin Ryder, portfolio manager.
Currently, the website listed in the SEC filing – www.bikretf.com – is not yet responsive, suggesting official launch details are to be confirmed.
Reference to ‘BIKR’ is likely a play on Jim Rogers’ colourful past, which includes one of the best known travel books ever written about travel by motorcycle and investment ideas, originally published back in the early 1990s: Investment Biker: Around the World with Jim Rogers (https://www.amazon.com/Investment-Biker-Around-World-Rogers/dp/0812968719)
The ETF is described as a “passive” product, with the benchmark index provided by Ocean Capital Advisors LLC, which has as its chairman Jim Rogers.
“The index tracks the performance of single-country (including emerging markets) exchange-traded funds (‘ETFs’) that each track a broad-based index composed of equity securities primarily listed on an exchange in the applicable country (collectively, the ‘Underlying ETFs’) or an ETF tracking the 1-3 year US Treasury Bond market (a ‘Treasury ETF’),” the SEC filing states.
“The underlying index of each single-country Underlying ETF included in the index may include equity securities of small-, mid-, and large-capitalisation companies, and such equity securities are expected to have exposure to a wide range of industries reflective of the economy of the applicable country. The index includes a single Underlying ETF per country. Each eligible Underlying ETF is specified in the index’s rules, and the Underlying ETFs generally reflect the ETF with the broadest exposure to equity securities in the applicable country and meeting certain minimum investibility criteria.”
“The allocation of the index’s weight among the Underlying ETFs or Treasury ETF is based on a proprietary artificial intelligence-driven algorithm (the “Model”) that analyses macroeconomic data (eg, volatility, interest rates, productivity, gross national product) monthly to identify likely changes in market directions in individual countries and within the global economy. The Model uses objective data to calculate the magnitude and probability of such market movements over an approximately 18-month period, while seeking to identify any “micro-cycles” that might develop in shorter time periods, to determine the optimal investment allocations based on the relative expected performance of the market in each country in the Index universe. The Model’s bias toward longer-term market movements is generally expected to minimize turnover at the time of each rebalance.”
“When the Model determines to reduce or eliminate exposure to a country, the reduction to such allocation (whether all or a portion of the country’s allocation in the Index) is replaced with the Treasury ETF. From time to time the Index may be significantly allocated to the Treasury ETF.”
“As of June 4, 2018, the Index consisted of single-country ETFs representing 39 countries. The four largest country allocations in the Index were Brazil (7.15%), South Korea (4.17%), Hong Kong (3.96%), and Mexico (3.54%), and 24.65% was allocated to the Treasury ETF.”
As a macro fund, the ETF filing lists a number or risks relating to investments abroad, or those linked to foreign companies that have used US securities regulation to list securities on US markets, such as risks around currency, depositary receipts, foreign markets and trading, political and economic developments, and the risk that private companies could be renationalised.
The SEC filing also warns of risks linked to US government debt, given the substantial rise in such debt issued since the global financial crisis in 2008-9 and the need for the US Congress to revisit and adjust the debt limit ceiling ongoing.
“Any controversy or ongoing uncertainty regarding the statutory debt limit negotiations may impact the US long-term sovereign credit rating and may cause market uncertainty. As a result, market prices and yields of securities supported by the full faith and credit of the US government may be adversely affected.”
For non-US investors, the ordinary income dividends “will generally be subject to a 30% US witholding tax, unless a lower treaty rate applies or unless such income is effectively connected with a US trade or business.”