ETF Edge - LGBTQ+ ETF & The Rise of ESG investing

Episode Date: June 2, 2021

CNBC's Seema Mody fills in for Bob Pisani this week. In honor of Pride Month, a brand-new fund is tracking the top 100 companies across corporate America seeking to promote LGBTQ community goals and values – plus, commodity prices may have raced higher all year, but what’s the deal with gold? Moody spoke with Bob Tull, Co-founder and President of Procure Holdings, Tom Lydon, CEO of ETF Trends, and Andrew McOrmond, Managing Director at WallachBeth Capital. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

The ETF Edge podcast is sponsored by InvescoQQQ, supporting the innovators changing the world. Investco Distributors, Inc. Welcome to ETF Edge, the podcast. If you're looking to learn the latest insights on all things, exchange-traded funds, you're in the right place. Every week, we're bringing you compelling interviews, thoughtful market analysis, and breaking down what it all means for investors. I'm Sima Modi in for Bob Pisani. In honor of Pride Month, today we are delving into a brand new fund that, tracks the top 100 companies across corporate America seeking to promote

LGBTQ community goals and values. Plus, commodity prices may have raised higher all year, but what's the deal with gold? Here's my conversation with Bob Toole, co-founder and president of Brookhure Holdings, plus Tom Leiden, CEO of ETF Trends, and Andrew McMormond, managing director at Wallach Beth Capital. Tom, start with you. Your thoughts on this new fund? Well, it's coming at the right time. We've got some great people behind. it, as we mentioned earlier, SEMA, when you have Congressman Barney Frank, you've got Martina Navratilova, you've got a real strong group of advocates for this, for the right time.

And I think those things are going to be key and critical to what's going on in the future. If you get a spokesperson like Martina Navratilova or Barney Frank talking about the importance of these values within the corporate community, people will pay attention. And the way that this is set up to have the 100 largest companies that are behind these types of values, I think there's going to be a lot of pull for it. Bob, you're the one who made and launched this fund. Tell us about it and the timing of this launch as well. Well, the timing obviously is very good. We made sure that we tried to get the thing launched ahead of time, perceiving the index and the ETF to be of value to the community. And then I think the other thing that is really important is that the members of the community are very loyal. And so there's a sediment component to this index, which is kind of missing if you kind of just do your quantitative analytics associated with traditional index construction methodology.

And I want to join, I want to bring in Andrew McMoran managing director at Wallach Beth Capital. Andrew, great to have you on ETF Edge today. your thoughts on this intersection now, more younger clients, investors who perhaps are looking to match their social governance goals with investing. Yep, and thanks, Tim. That should help a lot to be on.

I also think, if you're talking about young people, let's talk about the talent and where these people are going to work. I think that's an underlying thing that's going to drive this in the long-term future, right? So as an individual and as speaking in Wallach Beth, we're full supporters of equality in the workplace and in life for all people, right?

Now, think about the CTS. If these companies are supporting no exclusions in a diverse workplace, we're not going to attract top talent. And top talent means a company performs better. And that's really the kind of hidden thing in here that's going to drive better performance. There's a new bean survey that came out a few months ago that showed performance is actually the number one factor in selecting an ESG investment. So, you know, this should do quite well in the long term given that workforce supporters up.

Bob, how did you decide which companies are prioritizing inclusion more than others? Is it looking at board representation, or are you going beyond that? Well, let me just first respond to Andy's comment because he's absolutely right. The index is currently outperforming the S&P 500 and has been since the day we launched it in November of 19. So the index itself is doing, I think, what it's supposed to do, and it's measuring people's sediment towards companies and the values that they, in essence, exhibit to the marketplace. The structure started out with over a thousand securities, and then what the first thing we did was screened them

for inclusion in ESG using the UN standards. And then the second thing is we went out and we contacted members of the community. We hired Harris Poll. And the Harris Poll staff went out and surveyed as many people as they felt would be statistically significant. And from that, we drew up to do that that we drove the weighting of the selections of the company.

Understood. Clearly a comprehensive process used. Guys, let's switch gears to the reopening story. The jury is still out as a great debate over inflation rages on. Commodity prices have surged as lockdown measures ease and demand races higher for everything from lumber to soybeans, sugar, and even rubber. But one precious metal appears to be sitting out on this major meltup. And that is gold. Tom, tell me what is happening here.

gold was supposed to be the greatest inflation hedge. What's gone wrong? Yeah, well, I think there are a couple key things here, Seema. First and foremost, people don't need gold right now. They need everything else. They need base metals. They need oil and gas. They need agriculture, corn and wheat.

And all these commodities are really key to what's going on right now. We have problems in the pipeline. Things aren't arriving on time. So it's a demand issue for sure. And we're also in the situation where people are increasing prices. We're seeing that at the supermarket. We're seeing at the pumps. We're seeing it in supermarkets as well.

So all those things align doesn't bode well for gold. Gold's kind of flat this year when you take the largest commodity fund, PDBC, which is the Investco optimum yield, diversified commodity fund, that's up over 27% this year. And one other thing about gold, I think it's kind of taken it on the back, based on what's going on with Bitcoin. I just got to Miami this morning. I'm going to be at the Bitcoin conference.

They were expecting 2,000 people six months ago. They're going to be over 10,000 people here. I think it's taken a little bit of the luster out of gold. That's so interesting. Andrew, your thoughts on this sort of phenomenon, especially the correlation, if there is, between Bitcoin and gold. That is, Bitcoin way up this year and gold is down.

Right. Let's think about the extreme. So gold's actually caught a little bit of a rally, if you notice in the last two weeks, really, and the lockstep with the correction in the cryptocurrencies, right? Think about the volatility. We feel our institutional investors, who are obviously starting to get involved in cryptocurrency,

at least thinking about it, then they get their first taste of a real decent, which is a 50% correction. A lot of people don't want to stomach that, even as an inflation hedge. So the more that those happen, I think it trickles back in and just think of the extremes, right? When cryptocurrencies are down,

people like, oh, my gosh, it's a scam, it's whatever. And then when cryptocurrency rallies, everyone's buying it because they're like, hey, it's going to take over back to America, right? Both those things aren't going to happen, right? It sits somewhere in between that. When gold rallies, it's like, hey, is it too high? What's the inflation hedge? You know, do I use it for anything besides a store value? And when gold is down, people go, hey, maybe now is a good time to get in a precious metal that's been around for $5. I guess the question is, are you making changes to your portfolio right now? Do you have clients who are telling you, Andy, you know what? I want less exposure to gold.

I actually think our clients think that there could be a little bit of a pop here. We've seen some buying. IAU did a reverse split, which is a big old ETF, and I actually think this could probably get near. It's actually near an all-time high. It just doesn't move as fast, right? So I think it could hit that $2,000 level pretty soon. Tom?

Well, I think there's always demand for gold. It makes sense to have diversity in 3 to 5% in your portfolio. But as you probably know, Seema, there's a line around the block at the SEC with people having applications for Bitcoin. ETFs. It's going to be very interesting to see if that happens because then you can buy through your Schwab or your Fidelity account. You can buy Bitcoin and trade it through your brokerage account. That would be fantastic, and I think that's going to be coming sometime soon.

Something we're looking for. That would put some pressure on gold. I agree with that time. That's it for today. I'm Simam Modi in for Bafasani. Thank you for listening. Make sure you tune in next week. And in the meantime, you can tweet us your questions or topic ideas at ETF Edge, CNBC. Invesco QQQ believes new innovations create new opportunities. Here's the greater possibilities together. Learn more at investco.com slash QQ, Invesco Distributors, Inc.