It’s not fun to be a small fund manager most of the time, says Jan van Eck, but he’s an exception right now

Van Eck likes the benefits of ETFs, he says, but “isn’t religious” about the types of funds that are best suited for investors. He is deeply involved in product development within the company, but has also focused on more important issues, including serving on the board of directors of the National Committee on US-China Relations. The company had its first presence in China since the 1990s.

Watch:Relations between EE. United States And China is bad and worsening, with major ramifications for trade and investment, and the American presidential election. United States

MarketWatch spoke to van Eck about the ETF’s ecosphere, what investors need to know about China and how the Federal Reserve has handled the market shocks created by the coronavirus crisis. The following interview has been slightly modified for clarity.

Market clock: The company, VanEck, began by offering investors access to gold in a mutual fund, but now has only a handful of mutual funds and a few dozen ETFs. Which ETFs are Good for End Investors?

Jan van Eck: We always think about the purpose of the fund in people’s portfolios. In fact, I sit with our active portfolio managers when we are sitting at the desk, and it takes a long time. But I think the solution to being active these days is that you really should have a concentrated and strong conviction portfolio that is not just a “plus index”. I still believe in assets, and I think that in certain areas, like sustainable investment probably, I think that assets really have an advantage because you really have to get involved with companies. I am not religious in one way or another; this is where our business really grew.

Market clock: What is your opinion on the new non-transparent active funds?

Van Eck: Ah … you know, I don’t think it’s a big deal. I think if you like an active strategy, as an American investor. So, for a taxable account, you are happy to have it in an ETF because you get higher after-tax returns due to the tax advantages of ETF packaging. But I think the ETF ecosystem does not expect funds actively managed by those who cannot see the underlying assets.

Watch:What is a “non-transparent” ETF and why would we want to have one?

Market clock: The other thing that I’m really curious about is last week’s proposal from an industry heavyweight group on how to fine-tune naming conventions. Many people interpreted it as a heavy hand, creating the most traditional investment approaches for which they are better known as “normal” and separating the alternatives as “other”. What is your opinion?

Van Eck: I really like what I understand to be its objective, which is to communicate to investors the essence of the fund and the risks and rewards. In fact, this is one of our internal philosophical principles which, when you talk to investors, you not only give them the advantage, but you also tell them the disadvantage.

It is very difficult to know the future and it is very difficult to know what will explode. Rules and labeling don’t really get you there. Let me give you an example. People had great access to commodities through commodity futures like the United States Petroleum Fund
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We knew that the shape of the futures curve was not something that any investor could see. But many people have brought these products to the market saying that the curve gives you this advantage. When they started, they basically said: you get an additional 4% annualized return mainly because of the shape of the futures curve, and I think so [laughing] yours do not and it recedes.

Watch:Are ETFs… safe for retail investors?

So it took a while because we couldn’t find a good way to create a commodity fund, which is silly because we had this gold fund. In the past year of the bull market in commodities, we finally found a mutual fund[ConstantMaturityProductsFund[elFondodeproductosdemadurezconstante[Fondsdeproduitsàmaturitéconstante[elFondodeproductosdemadurezconstante
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]there is a constant turnover of contracts. It made sense, but it’s better not to do something that carries so much risk.

The USO exploded, but even in 2006, the difference between a commodity futures index and spot oil prices was 20%. So this potential risk was known. As a company, we have decided not to manufacture leveraged or reverse products for the same reason. There’s no way to win the war to explain to a client when you say, I give you [three times] the return, then you turn around and say, but we’re not going to give you that. It’s ridiculous.

Market clock: What does a small business look like when faced with something like BlackRock or Vanguard?

Van Eck: 80% of the time, it’s not fun not to be one of the giants of the ETF. I am talking about the concentration of the ETF industry and many other industries as well. But it’s partly a result of technology and scale and lower cost to the customer, so I can’t fight it. Our goal is simply to try to survive what I see as an ongoing consolidation effort.

That said, I think we are now in this 20% of the time where I am really happy to be a private company. In this type of turbulent environment, we don’t have to worry about other types of nonsense: hiring hangs or whatever you might get in a larger organization. We can continue to focus on our growth plans. It’s an advantage. Obviously, having gold in our mix is ​​positive because our AUM: I’m sure it dropped dramatically in March, but recovered a little, which helps. We now have enough resources and evolution to have a chance to survive another decade.

(Editor’s note: As of May 21, the company’s assets under management were $ 53.6 billion, about $ 1 billion more than in early March.)

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Market clock: I was told that you currently have a lot of opinions on China and the investment case in China.

Van Eck: I guess, as I would say, you don’t have to like China, but if you’re an investor, you need to have an opinion on China. The United States and China are the two engines of the global economy. What I do in my quarterly investment outlook is to make sure we don’t have a single American conversation about the global economy because I think the markets are affected by what’s going on in China . The last time commodity prices fell was in 2015, and it was not because the United States was in recession; This is because China was in a virtual recession.

Watch:No, the Chinese economy has not improved and the implications could be more serious than investors think.

The biggest political move in the past year was undoubtedly when the Federal Reserve started cutting rates. I think they did it because they were afraid of a hard landing in China, which considerably slowed down its economy, raised interest rates in China and also harmed its financial markets. I describe the world as: We and China are on a life raft. We can take out the knives, but I think the two of us, no matter how much we sharpened the knife and want to stab the other person, we will end up piercing the liferaft and then we will be at sea with the sharks. This is where we find ourselves financially.

Market clock: With a choice to come, it seems like these knives are really coming out.

Van Eck: My basic scenario is that there is no major policy change affecting the markets compared to China. There will be a lot of rhetoric, I am very aware of it. I’m on the edge of a non-governmental organization working with China. They organized the first ping pong game in 1972, and Henry Kissinger is also participating. So I try to be careful. But if there is a lot of political rhetoric, there is also a lot of openness for the Chinese economy right now, according to the trade agreement, so we’ll just have to see. I don’t want to minimize it: there is a risk. But if it really stimulates the markets, I’m not so sure.

Market clock: You have an ETF
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It follows the “Fallen Angels”, which are premium bonds at the time of their issue, but which have since fallen into a junk. Are you talking about the Fed entering this corner of the market?

Van Eck: This is a low cost distressed debt fund, right? It is the year of the fallen angels. We will likely have the greatest influx of fallen angels in our careers. I think the fund is well positioned. It’s a great counter purchase strategy.

As for the Fed’s policy, I am against the Fed’s involvement in the ETF markets. I’m not denying that they certainly helped the liquidity of the markets, but I think the ETF ecosystem is small, and they don’t need to use ETFs. In Europe, [central banks] purchased many instruments over the past decade and did not need to go to ETFs. I also believe that it is an irreconcilable conflict for the largest ETF company to make the purchase of ETF. I don’t care how much sunlight there is in this process, it’s something you wouldn’t think of applying to another industry.