A roughly $100 million investment by Trustees of General Electric Pension Trust in an ETF offered by Simplify Asset Management "is a shot across the bow of hedge funds all across the U.S.," Bloomberg Intelligence Senior ETF Analyst Eric Balchunas said.
Institutional investors like "private, exclusive" investments, Balchunas said.
"ETFs are like the public pool, they don't want any part of it," the analyst said in comments Dec. 14 during the "Bloomberg ETFs in Depth" event, held at Bloomberg's global headquarters in New York. "So, to get an institution to use an ETF, especially not for liquidity purposes, but for the strategy is so rare."
Balchunas moderated a panel on "ETF Solutions," which included Michael Green, chief strategist and portfolio manager at Simplify.
A 13F holdings report filed with the Securities and Exchange Commission by Trustees of General Electric Pension Trust for the quarter ended Sept. 30 showed that it held roughly 4.17 million shares of the Simplify Market Neutral Equity Long/Short ETF valued at $103.5 million.
The ETF, which has a June 12 inception date and goes by the ticker symbol EQLS, had about $107.5 million in assets as of Dec. 14, according to a fund overview available on Simplify's website.
"If you're actually looking at these types of exposures and the role of institutions, we're increasingly being vetted by the institutions, the consultants are coming in and looking at it and recognizing that (the) strategies are identical, much lower price, much better liquidity," Green said.
According to its website, Simplify was founded in 2020 with the mission of making institutional-grade alternative strategies accessible to all investors via the low-cost and transparent ETF vehicle.
"Alternative strategies can be a powerful way to improve portfolio risk-adjusted returns, but for decades these strategies have only been available to institutional investors, corporations, and the ultra-rich through hedge funds," Simplify's website says. "This all changed in 2020 when the SEC announced rule 18f-4, allowing many of these strategies to be run inside ETFs, which are accessible to everyone."
The category of hedge fund-like ETFs totals some $10 billion today, Balchunas said.
"It's never been a category that's taken off," he said. "A lot of people have tried their hand there."
Balchunas asked Green where he expects the category to be in five years.
"Well obviously, we think it's going to grow quite rapidly," Green said. "The absolute growth of the institutional space is relatively low, but the gain share against hedge funds I think is dramatic."
Simplify's assets under management totaled about $3.18 billion as of Dec. 14.
