Vinyl sales are up, the kids are using flip phones, brands are leaning into IRL marketing — all things analog are making a comeback.

The ETF world is no exception: Wedbush recently filed a preliminary prospectus for an Analog Economy ETF, which will track an index of about 50 companies “whose business models depend on human labor, physical assets and tangible output.” With ever more money piling into the AI trade (and increasingly loud warnings that it could kill us all), this fund attempts to remind investors that the real world still exists, and there’s still money to be made from it. But the question is whether the fund’s holdings will be enough to differentiate it.

“It’s a mix of the industrials and materials sectors, and there are plenty of ETFs out there that can give you exposure to those sectors,” said Loren Fox, research director at Fuse Research Network. “If you really want one ETF that combines industrials and materials in one ticker, then that’s a little more distinctive … For some investors and financial advisors, one of the questions will be: ‘Do I really want all of these sectors in one ETF?’ Because they’re not necessarily driven by all the same trends.”

Concrete, Not Compute

Wedbush’s fund will focus on companies in industries including construction and materials, machinery, vehicle and equipment manufacturing, distribution and environmental and commercial services, per the prospectus. It will exclude companies whose primary business is connected to AI, semiconductors, data centers or power generation.

Its closest analogs (sorry, not sorry) are funds that track the HALO index (heavy asset, low obsolescence), of which there are at least two:

• The Roundhill HALO ETF (LOHA) was launched in May and has about $50 million under management, per ETF.com.
• The Tuttle Capital Heavy Assets Low Obsolescence ETF (HALX) also launched in May and represents about $2.5 million. Both funds have climbed about 1.5% since inception.

Hedge Your Bots: HALO funds or Wedbush’s Analog Economy ETF may need to wait for an AI rout to see some real action, said Athanasios Psarofagis, an ETF analyst at Bloomberg Intelligence. “I like it as a hedge towards all this AI stuff,” he said. “At some point we’re going to get waxed with some massive selloff, and I think people are going to reassess a little bit.”

If you can’t beat ’em, join ’em.

That might be the ETF market’s new motto, thanks to a surge of M&A deals including Goldman Sachs buying options ETF provider NEOS Investments and T. Rowe Price buying fixed income provider F/m Investments. Acquisition of an indie shop lets many large asset managers avoid FOMO by adding specialization and differentiating their product lineups. The fastest way to get into the game or to expand their ETF footprint is by buying another firm, said Brittany Christensen, senior VP of business development at Tidal Financial Group. But what makes an ideal acquisition candidate?

“It’s partially about your brand recognition, as well as being known for a specific type of ETF strategy,” Christensen said. That strategy can complement what the large asset manager offers or help them expand in a space where they’ve failed to be competitive.

The Upshot for Investors

The motivation for a firm’s purchase of an ETF shop is often the underlying infrastructure, because it can take a while to bring an ETF to market, Christensen said. It’s about finding smaller shops with existing distribution or that are well known by ETF allocators. A lineup of ETFs or a “repeatable idea” that can be used on different indexes or on different underlying names or portfolios to build out a suite of products is also attractive, Christensen added.

But firms should also consider what the change means for investors who use the ETFs at acquired shops:

• “Too many acquiring firms assume that investors in the ETFs that are being acquired will be happy to be a part of a large firm,” said Stacy Havener, founder and CEO at Havener Capital. “The devil is in the details. And the onus is on the acquirer to craft a narrative that meets investors where they are, addressing their concerns, and their fears, and their hopes about the future.”
• Acquisitions of sponsors of relatively unique ETFs “are likely to be a positive for investors, since the purchasers are usually larger, better funded companies, so there will likely be more resources available to the management of the ETFs,” said Kathleen Macpeak, an attorney at Morgan, Lewis & Bockius. “In such a case, there are typically no big changes to the products.”

Most Eligible. Bloomberg ETF analyst Eric Balchunas recently ranked what he called the “most eligible indie ETF issuers” by organic growth rates, size, revenue, asset stickiness and product diversification. Plenty of household names including Roundhill Investments, Tema, Rex Shares and VanEck made the list.

What do Kevin Hart, Jon Hamm and Jamie Foxx have in common? They all really want people to engage in sports betting. And now, after years of permeating practically every inch of TV, the internet and social media, sports gambling is attempting to find a corner in traditional finance.

Rex Financial announced Monday it’s launching Alpha Sports, a company that will create ETFs tied to futures contracts on CME’s FutureSports Performance Indexes. As Rex puts it, Alpha Sports will “turn what happens on the ice, the field and the court into exchange-traded funds.” Volatility Shares and LeagueShares are also pursuing sports-performance ETFs, having filed for similar NHL funds in August and MLB funds this week.

Though striving for innovation, there might be a hole in their game plans: Most games happen after markets have closed. “For these to really successfully move, you’re going to need 24/7 trading, which is coming,” said Matt Tuttle, CEO of Tuttle Capital Management. “If I’m sports betting, I’m not moving between 9:30 a.m. and 4 p.m. I’m waiting to see the injury report before a game and know who’s playing.”

From Stats to Assets

REX has filed with the SEC for Alpha Sports’ BaseballShares and HockeyShares, suites of ETFs tracking every MLB and NHL team (there will also be 2X leveraged versions):

• The funds will track indexes measuring team performance using official sports statistics. Every hit, goal, run, stolen base and more feeds into a rules-based benchmark that converts those statistics into a single index level, which can then be tracked through futures contracts and, ultimately, ETFs.
• Tuttle isn’t convinced the average sports gambler will migrate to ETFs for regular wagers, though. “The sports bettor is going to have a whole lot more flexibility on their DraftKings account than in their [brokerage] account,” he said.

Mangia, Mangia. The ETF wrapper has become an experimental training ground. And the hunger for what is essentially gambling doesn’t stop at sports. Roundhill, Bitwise and GraniteShares all filed in February for ETFs tied to presidential, House and Senate election outcomes.

Rex, Volatility and LeagueShares are taking the throwing-spaghetti-at-the-wall approach to product development, said Zachary Evens, Morningstar senior analyst. “If one or a handful of products stick, they can be very lucrative for the ETF issuer and more than make up for operating many subscale ETFs,” he said. “These are just the latest pieces of spaghetti.”