Michael Venuto on ETFs in 2024: FIRE, Crypto, Nancy Pelosi & More | #560

Episode Summary

Executive Summary: Meb Faber and Mike Venuto discuss the explosive growth and evolution of ETFs, emphasizing crypto adoption, structural innovations, and Tidal’s white-label platform. The conversation centers on how ETFs are shifting access, tax efficiency, and product design, while new niche strategies—Fire, Sharia, YieldMax, veterans, and factor/derivatives overlays—show how packaging and distribution can turn good ideas into scalable funds.

Main Topics: ETF industry growth and structural innovation (Priority: 5/5): Venuto argues the ETF market is being reshaped by active management, derivatives regulation, tax efficiency, and new wrappers that package complex exposures in tradable form. Bitcoin ETF adoption and crypto product demand (Priority: 5/5): The hosts discuss IBIT’s rapid asset growth and the broader wave of crypto-related ETFs as evidence of institutional adoption and BlackRock-driven legitimacy. Tidal/white-label business model and fund launch process (Priority: 5/5): Venuto explains how Tidal evaluates ideas, provides product development support, and helps clients launch, market, and scale ETFs with seed capital and differentiated positioning. Fire movement ETFs (Priority: 4/5): Tidal launched FIRS and FIRI to serve the FIRE community with a savings-oriented permanent portfolio and an income-oriented yield strategy, with no platform fee as an engagement play. Case studies in successful niche ETFs (Priority: 4/5): Examples like SPUS (Sharia), YieldMax, VETZ (veterans), RISR, and Gotham funds illustrate how targeted communities and novel structures can create durable demand. ETFs vs mutual funds and conversion economics (Priority: 4/5): The discussion highlights why ETFs outperform mutual funds structurally, especially for taxable investors, and why conversions are often complicated by custodians, platforms, and legacy fee arrangements. Future product landscape (Priority: 4/5): Venuto predicts most structured-product ideas—covered calls, downside buffers, leverage, and single-stock overlays—will migrate into ETFs across major indices and hot stocks.

Key Arguments: Bitcoin ETF flows show that once access is made easy and politically viable, adoption can be extremely rapid—especially when major institutions like BlackRock enter. The average expense ratio of Bitcoin ETFs is lower than that of gold ETFs, underscoring how competitive and efficient the new crypto wrapper market has become. ETF success depends on either true differentiation or enough seed capital to survive long enough for a market cycle to arrive. White-label ETF sponsors add value not just by launching funds, but by helping with marketing, distribution, ticker selection, product iteration, and platform placement. The FIRE community is a natural audience for ETF innovation because it is fee-sensitive, self-educating, and often underserved by traditional advisors. ETFs are tax-efficient because they eliminate many of the intermediary fees and frictions embedded in mutual funds and traditional product distribution. Conversions from mutual funds to ETFs can unlock tax and structural alpha, but are operationally difficult because of direct shareholders, custodians, and legacy distribution. Structured products and derivative-based retail exposures will increasingly be repackaged into ETFs because ETFs are easier to trade, more transparent, and often more tax efficient. Niche or values-based products can scale when they serve a passionate community and have a compelling use case, not just a marketing angle. Product suites matter: one successful fund can become a platform when it spawns adjacent exposures, short versions, income variants, or thematic extensions.

Data Points: Tidal assets on platform: over $25 billion - Venuto describes Tidal Financial Group’s scale and white-label ETF platform assets. Number of ETFs on platform: over 175 ETFs - Current breadth of Tidal’s ETF platform. Tidal team size: 80 people - Venuto says the firm has grown to roughly 80 employees. Tidal assets in business: $26 billion - Venuto refers to the firm’s current asset base later in the conversation. Funds launched by Tidal: 100+ funds - He says they have helped launch over 100 ETFs/funds. Bitcoin ETF asset milestone: $40 billion - IBIT hit this level extremely quickly after launch. Bitcoin ETF time to $30B: 211 days - Referenced in the Eric Balchunas tweet about IBIT growth speed. Bitcoin ETF time to exceed $30B to $40B: 2 weeks - IBIT added another $10B very quickly after reaching $30B. Prior fastest ETF growth record: 1,253 days - Old record held by IEMG before IBIT shattered it. IBIT rank among ETFs by assets: top 1% - Highlights how quickly the fund moved into the largest ETFs by asset size. Age of IBIT when discussed: 10 months old - Used to emphasize the speed of asset accumulation. Bitcoin ETFs average expense ratio: south of 20 bps - Venuto compares Bitcoin ETF fees favorably to gold ETFs. Gold ETFs average expense ratio: north of 30 bps - Used as the comparison group against Bitcoin ETFs. FIRE ETF platform fee: 0 - Tidal says it will charge no platform fee for FIRS and FIRI. FIRE target yield: 4% - FIRI is designed as an income portfolio targeting this yield. Break-even rule of thumb at 50 bps fee: ~$50 million AUM - Venuto explains the rough asset level needed to support a fund with a 50 bps expense ratio. Break-even rule of thumb at 100 bps fee: ~$25 million AUM - Venuto gives a second estimate for higher-fee products. VETZ asset level: almost $100 million - Veterans-focused ETF has achieved meaningful early scale. RISR duration: about negative 10 duration - Used to explain why the bond strategy benefits when rates rise. RISR yield: 6%–8% - Venuto cites the strip yield range for the strategy. YieldMax suite count: 20+ funds - The strategy evolved into a family and then a fund-of-funds. Number of fastest-growing ETFs that were crypto-related or adjacent: 14 of 25 - A tweet from NatureAcey cited during the crypto discussion. TETF index annualized performance: around 16% - Venuto says the ETF industry index has performed well despite the fund’s lack of scale. ETF industry growth rate referenced: closer to 20%–21% - Used to argue the private/public market gap in the ETF space.

Pivotal Quotes: "We are doing this for financial and creative freedom for our clients and our stakeholders." — Mike Venuto: Tidal’s guiding mantra and the rationale behind the firm’s innovation-focused culture and FIRE initiative. "The structural setups, right?" — Mike Venuto: Refers to ETF and derivatives rule changes enabling new product structures, leverage, and active strategies. "If you come out with 50 million to 50 bips, you're not writing us checks." — Mike Venuto: Explains Tidal’s break-even and seed-capital framework for launching viable ETFs.

Implications: ETF innovation is moving from simple index tracking to a broad product-engineering layer for niche communities, tax management, and structured exposure. Investors may see more choice, lower friction, and faster product cycles, while mutual funds face growing pressure to convert or differentiate.