An ETF that invests "without Musk" is coming. A product that tracks the Nasdaq 100 and S&P 500 while excluding only Elon Musk-related companies, including Tesla and SpaceX, is being pursued, prompting assessments that the ETF market is entering an era that reflects investors' tastes and values.
Tracking Nasdaq 100, but Excluding Musk Companies
Bloomberg reported on the 9th that Subversive ETFs, a fledgling asset manager, filed registration documents with U.S. securities regulators to launch ETFs that track the Nasdaq 100 and Standard & Poor's (S&P) 500 indexes while excluding companies founded, managed, or controlled by Elon Musk.
The planned ticker symbols are "QQNE" and "SPNE." The funds are designed to invest in the broad market while excluding only Musk-related companies such as Tesla and SpaceX.
The products emerged after SpaceX was recently added to the Nasdaq 100 index. SpaceX was successively added to the FTSE Russell, MSCI, and Nasdaq 100 indexes less than a month after its listing. This came as major index providers revised their rules to accelerate the index inclusion of large initial public offerings (IPOs).
On the 7th, the day SpaceX was added to the Nasdaq 100 index, its share price plunged 6.8%, failing to enjoy the effect of index inclusion. The offering price was $135, but the closing price that day was $149.47, falling below the $150 opening price at the time of the IPO for the first time. In contrast, the S&P Dow Jones Indices did not include SpaceX in its indexes early.
Some point out that adding a mega-cap company to major indexes before market prices are sufficiently formed could create a side effect in which passive investors are effectively obligated to buy overvalued stocks.
ETFs Enter an Era of "Personal Taste"
The products are seen as symbolically demonstrating recent changes in the ETF market.
In the past, ETFs were centered on index investment products that tracked the entire market at low cost. Recently, however, products reflecting investors' likes and dislikes—not only for specific industries or themes but for individual companies, chief executive officers (CEOs), and even specific individuals—have been launched one after another.
Looking at Musk-related products alone, leveraged ETFs that track Tesla's stock at several times its movement and SpaceX-related leveraged products have already appeared. In the past, an "ELON ETF" that included a strategy of buying Tesla and short selling Ford was even launched.
This ETF goes a step further. By tracking the entire index while excluding only companies related to a specific individual, it is assessed as effectively combining investors' value judgments with a passive ETF.
"New Investment" vs. "Too Finely Sliced"
Market experts' assessments are divided. Nate Geraci, president of NovaDius Wealth Management, said, "Because Elon Musk is an extremely polarizing figure, it is understandable that an ETF manager would try to turn this into a product," but added, "If an ETF that excludes a specific company from an index based solely on one investor's likability has now appeared, it may be excessively fragmenting the market."
Dave Nadig, CEO of ETF.com, also expressed a skeptical view. "These hyper-fragmented novelty products may attract funds temporarily, but building a long-term investment base is not easy," he said. "It is interesting marketing, but hard to see as a clear investment logic."
In contrast, the asset manager presented as the background for the launch that some investors are concerned about corporate governance risk, political risk, and high stock price volatility regarding Musk-related companies, through its prospectus.
Jeffrey Ptak of Morningstar also understood asset managers' differentiation strategies but urged investors to take a cautious approach. "I understand why ETF managers want to reveal their presence in the market in new ways," he said, "but investors need to carefully examine whether such products actually match their investment objectives and whether they are bearing excessive costs for a small differentiation."
The ETF market has recently continued its largest-ever boom. According to Bloomberg Intelligence, 214 ETFs were newly launched in June alone, setting a record high, and about $191 billion flowed into the ETF market in the same month. The industry says, "This is now an era in which almost every idea an investor can imagine is turned into an ETF," assessing this "anti-Musk ETF" as a representative example of that trend.
