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Can an economist famous for calling the Great Financial Crisis be the future of investing? Nouriel Roubini, has been called ‘Dr. Doom’ for his frequently grim take on the economy and the future of the equity markets, is launching his own exchange-traded fund (ETF).
Roubini is a Professor Emeritus and Professor of Economics at the Stern School of Business, New York University. He is also CEO of Roubini Macro Associates and now he will be one of three portfolio managers for the Atlas America Fund. Roubini is the co-founder of the Atlas Capital Team. The company website states that it uses AI and machine learning technology to deliver inflation protection with the goal of balancing stability and opportunity.
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According to the SEC filing, it will be an actively managed ETF investing in REITs, investment-grade fixed income securities including U.S. government securities, municipal securities, corporate bonds, gold trusts, structured securities and equity securities of U.S. and non-U. S. companies, including common stocks, American Depository Receipts (ADRs), preferred stocks, and alternative strategies. The terms leave the fund open to investing either directly or through other ETFs, futures, options, swaps, and forward contracts. Approximately 80% will be in investments tied to the United States. The fund will invest 15% of its net assets directly in real estate or in private real estate funds.
Roubini’s particularly gloomy take on the markets will likely influence how the fund invests. The fund’s primary objective is to produce stable returns across all market conditions and preserve capital. The portfolio aims for moderate returns with low volatility over long periods. One thing to note for investors is that the filing states that the fund will invest to have a low correlation with the broad equity markets during periods of decline. This is good news in terms of stability, but it is also anticipated that the fund will not experience as much growth during periods of market expansion.
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Potential investors should also know that Roubini doesn’t always get it right. In 2022, he told Bloomberg that we could face a long and ugly recession and that stocks could drop by 40%. He changed his tune by January 2024, saying the economy may have avoided the worst-case scenario. If he invests based on his predictions, it could impact the overall returns of the ETF. Eric Balchunas, senior ETF analyst at Bloomberg Intelligence, said that launching an ETF is a bold move for Roubini because he frequently shares his opinions in the media. “With an ETF, people can see what you hold every day,” he said. “That’s one of the reasons people like Jim Cramer will never launch an ETF because he can be exposed.”
ETFs tied to celebrities, whether directly or indirectly, like the recent craze for political ETFs, are becoming more popular. Even NBA star Giannis Antetokounmpo is part of an ETF, the Calamos Antetokounmpo Global Sustainable Equities ETF (SROI), launched in February 2023 and has nearly $12 million in net assets. Most of them are relatively new, making it hard to evaluate long-term performance. Roubini is a well-respected authority on the markets, which may give him an edge in selecting investments for the ETF. However, his track record as an ETF manager is untested, meaning that some investors may want to watch his performance before diving in.
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