REX soars over USD1 billion on back of leveraged and inverse FANG+ offering
ETF Express award winner REX Shares, a Fairfield, CT-based ETP provider, has seen its assets rise to over USD1 billion, a 1000 per cent increase since 1 January.
Greg King, CEO of REX, explains that the inflow of assets is largely into their inverse and leveraged MicroSectors ETPs based on the FAANG stocks (Facebook, Apple, Amazon, Netflix and Google).
The firm partnered with Bank of Montreal to offer leveraged and inverse products and the first suite was the FANG+ suite. “They resonate with investors, especially in 2020 when one of the FAANG stocks will always be topical,” King says. “It’s been a great space to be in and we are the only one with a FAANG-based product.”
Leveraged and inverse ETPs receive some criticism within the investment industry which fears investors do not always understand the risks they are taking.
King says: “Market traders are buying these products and this runs the gamut from quasi-institutional, such as hedge funds, down to sophisticated retail investors.
“We are constantly aware that investors may not fully understand them, so we try to educate as much as possible. Education around the mechanics of leveraged and inverse ETPs has developed a lot since their first launch in 2006. The part that most folks need to understand is the daily rebalancing of the leverage - you need to walk through it and then it becomes really understandable and we take comfort in that.”
It’s not all about leveraged and inverse, though. “We are not stopping there,” King says. “We want to create a powerhouse of alternative strategy ETFs and ETNs, continuing to build for the future.”
King can lay claim to having invented the ETN, having worked at Barclays in London and New York where he designed the first ETN to track commodities under the iPath brand, a collaboration between Barclays and iShares.
At the time, the regulations in the US made it difficult to pool investments based on commodities. GLD had just launched, focused on gold. “But to put 20 commodities in was almost impossible,” King says. “But necessity is the mother of invention, so we adapted structured note technology to address that problem.”
King went on to co-found VelocityShares in 2009 which was subsequently bought up by Janus in 2014, which subsequently merged to become Janus Henderson.
2015 saw King launch REX Shares and the firm has found its current sweet spot with the BMO partnered ETNs.
“I figured out that in terms of DNA, I am an entrepreneur. It’s where I need to be rather than work for a large established organisation – I need to be building things, being creative, so our offering tends to not be plain vanilla as this has been done by the Vanguards of the world.”
King believes his derivatives background has given him the freedom and product structuring capabilities to focus on areas that are more niche.
“With REX I wanted to continue down the path of alternative ETPs, but not just ETNs, I wanted to broaden the range of what we could do,” he says.
Initially, King launched a couple of suites of unleveraged ETFs. “The ETF structure is expensive to maintain and it’s hard to see how much work goes into telling the story behind the product,” he says.
“Over the last decade, the space has gotten much more crowded, so it’s difficult to make the inroads without a large brand, unless you have a compelling idea.”
The breakthrough was the partnership with BMO and the launch of the leveraged and inverse products.
Future launches include a potential Bitcoin trust, through its Osprey Funds division, which has been in existence as a private placement and for which King says he has ‘broader goals.’ “You will also see us get back into ETFs that are not leveraged,” he says. “We are looking at a yield-based suite and we ideally want to become a place where investors and advisers can come for a whole range of alternative strategy ETPs.”
Coinciding with the recent growth, the firm has expanded its team with the hire of Dr Phil Pearlman as Chief Behavioral Officer/Head of Marketing and Robert Rokose, CPA, as Chief Financial Officer.