‘Star Portfolio Manager’ Model Returns in the ETF Era

Do investors want faces to go with their funds?

It’s hard to imagine ARK Invest without Cathie Wood, for example. And a small but growing number of exchange-traded funds have become associated with other financial personalities. Wedbush’s Dan Ives and Fundstrat’s Tom Lee are the personas behind successful lines of relatively new ETFs. Not only do their ideas shape the investment strategies, but their names are central to the marketing. It’s a trend that is attracting a lot of interest from investors. 

“While the fund industry has shifted away from star portfolio managers running funds, there are some star‑managed ETFs, like those run by Cathie Wood’s ARK and Chris Davis’s Davis Advisors that rely on a portfolio manager making discretionary, conviction‑driven stock picks each day,” said Cindy Zarker, relationship manager at Fuse Research Network. “Essentially, [it’s] the mutual‑fund ‘star PM’ model delivered through an ETF wrapper.” 

Charting a Course

Last week, Carter Worth, a financial analyst who regularly appears on CNBC, launched his own fund, the Worth Charting Options Income ETF (WRTH), which is designed to profit as short-term price changes after earnings announcements revert to normal levels. That fund uses a modified (and simply adorable-sounding) “strangle” strategy, which benefits from a stock price fluctuating in a range defined by a sold call option’s higher strike price and a sold put option’s lower strike price. It takes advantage of the decrease in the value of an option over time. “Short-term options expire worthless a high, high percentage of the time,” Worth told ETF Upside.

Funds built with technical or research frameworks differ from those of the star manager days of old, particularly because they follow rules-based methodologies instead of a portfolio manager’s daily judgment, Zarker said. “This removes key‑person risk and makes them more index‑like, even when active,” she said. “While a few well‑known analysts have packaged their research frameworks into ETFs, this remains a niche corner of the market, and we don’t view it as a huge trend in the foreseeable future.”

Still, for some of the ETFs in the niche category, having a face attached to a name has likely added wind to their sails:

• Tom Lee’s three Fundstrat Grannyshots ETFs attracted about $3.2 billion over 12 months, per Morningstar Direct. The $4.3 billion Grannyshots US Large Cap ETF (GRNY) has returned about 8% year to date and 40% over a year.
• The Dan IVES Wedbush AI Revolution ETF (IVES) dropped $5 million in the first three months of the year, but raked in nearly $900 million over 12 months. That fund is up about 5% year to date and 30% over a year.

Who Wants to Be a Billionaire? Worth built his business selling research to institutional clients, expanding it later to individuals like portfolio managers. “The most fertile ground is people who are currently customers,” he said, of potential ETF investors. “We have a brand. We have a body of work over 30 years … It’s a package.”