MarketsMuse followers who noticed our June 29 2015 post “What’s Next? ETFs for Crowdfunding?” and our curator’s somewhat parody-centric, but now prescient view that someone in the ETF world would soon come up with a crowdfund industry exchange-traded product can now share this post with others–as that prediction has come to fruition.
Per brief blurb from Traders Magazine–Yes, Matilda–the ahead-of-the-curve folks at Wisdom Tree have thrown the gauntlet down…
A Crowdsourced Index Fund
In what could be the ultimate filing of the cyberage, private label ETF firm Exchange Traded Concepts has filed for a fund based on an index provided by Centerboard Ventures Corp. The ETF will track an index created by users of the firm’s mobile app, the CrowdInvest Internet Platform.
The CrowdInvest Wisdom ETF’s underlying benchmark can include any U.S.-listed stock with an average daily trading volume of at least $15 million over the preceding 20-day period. Every month, the users of the app can vote on long, short or flat positions for eligible stocks. The top 35 companies with the most long votes after their short votes are subtracted and selected to be the index components for the following month, according to the prospectus. Index weightings are based on the number of votes the components received.
However, only four components can be replaced each month, and if there are not enough votes to determine weightings, all of the components are weighted equally.
This would be the first ETF to track a crowdsourced index. Presumably, investors in the fund would have to have a certain amount of trust in the judgment of the app’s users. The prospectus lists “Platform User Bias” as one of the ETF’s risks, and warns that the app users voting on the index’s components are not necessarily professional investors and could be subject to “cognitive and emotional biases.”
Vident Investment Advisory will serve as the fund’s subadvisor. The filing did not include a listing exchange, a ticker or an expense ratio.