PYPL - Fintech-focused SoFi Launches 2 New ETFs

SoFi Financial announced on Wednesday (May 8) that it has launched two new exchange traded funds (ETFs), with the first ETF centered around the gig economy and the second as a high-growth ETF.

The personal finance fintech company founded in 2011, which originally started as a student loan company, has recently branched out to provide a number of services including home loans, auto loans, life insurance and investment products.

The ETF’s, SoFi Gig Economy Index Fund (NASDAQ:GIGE) and the SoFi 50 ETF (NYSE:SFYF) are both partnered with Tidal ETF, a division of Toroso Investments for the operational, administrative and trust duties for the ETF.

The SoFi Gig Economy Index Fund,which began trading on the Nasdaq on Wednesday, is actively managed by Toroso Investments. GIGE is centered on companies that are involved in the gig economy. This is defined by SoFi as companies that are in some way involved in short-term employment and temporary contracts.

According to SoFi, the mission behind SoFi Invest entering into the ETF space is to help its members achieve financial independence.

GIGE, with a 0.59 percent expense ratio, is weighted and organized according to different levels of involvement in the gig economy. The weightings are separated into five different categories. The largest category, as detailed in the prospectus, accounts for 30-to-60 percent of the fund. It is comprised of companies that generate revenue directly from the gig economy.

“The greatest examples of that would be eBay (NASDAQ:EBAY), which is allowing individual companies to essentially sell a product, or Lyft (NASDAQ:LYFT) which is empowering people to act as their own boss or own their own cab company,” Mike Venuto, co-founder of Toroso Investments, told the Investing News Network (INN).

Companies that are focused on marketing or sales support for the gig economy fall in the second tranche, with a 20-to-40 percent weighting on the ETF.

“Social media is the key to that marketing, so names like Twitter (NYSE:TWTR) and Microsoft (NASDAQ:MSFT) with [its] ownership of LinkedIn are things along those lines,” said Venuto.

The following group are companies that facilitate financial transactions for this sector and those that allow individuals to get paid, Venuto pointed out.

He cited companies such as Square (NYSE:SQ) and PayPal (NASDAQ:PYPL), which are frequently involved within the gig economy. These companies stand in contrast to traditional credit card companies which establish enterprise licences with larger firms, Venuto further added.

Canadian tech darling Shopify (NYSE:SHOP,TSX:SHOP) and US-based Eventbrite (NYSE:EB) would fall under the next category. This includes companies that provide support individuals participating in the gig economy, such as healthcare or administrative service firms, Venuto notes.

According to SoFi, GIGE is a gateway for investors to invest in what they are comfortable and familiar with. It also helps their members get beyond the fear or hesitation of investing.

In addition to managing GIGE, Toroso serves as the investment adviser to SoFi’s recently launched zero-fee ETF’s SoFi Select 500 ETF (NYSE:SFY) and the SoFi Next 500 ETF (NYSE:SFYX).

Meanwhile, SFYF is a high-growth index fund which also began trading on Wednesday on the NYSE. The passively managed fund tracks the performance of the Solactive SoFi US 50 Growth Index.

Comprised of the top 50 of the 1,000 biggest publicly traded companies, SFYF has a 0.29 percent management fee. Employing a passive management strategy, SFYF is based on three core criteria, including: trailing earnings per share (EPS) growth, trailing sales growth and forward-looking EPS growth consensus estimates. All criteria are based on 12-month periods.

SoFi’s mission behind the launch of its ETFs is help its members, largely millennials, invest with more diversification. Compared to previous generations, this generation is relatively underinvested.

According to SoFi, the ETFs were developed to help its members achieve long-term outcomes and reduce volatility or risks associated with investing in companies, such as Lyft or Uber.

According to the Investment Company Institute, investments in ETFs more than doubled between 2008 and 2017, with over US$49 trillion invested in regulated funds at the end of 2017 worldwide. At that time, there were 114,000 regulated funds across the globe.

Driven by attractive low-cost structures, investments in US ETFs alone have reached almost US$3.5 trillion in 2017—a far cry from the US$500 billion ETF levels seen in 2008. The report further notes that 73 percent of fund inflows, or US$645 billion, were invested in ETFs in 2017.

SoFi cites exposure to earlier growth stage companies and investment in companies that are disrupting industries as two central features that add value to its funds.

On Thursday (May 9), SoFi Gig Economy Index Fund (NASDAQ:GIGE) opened at US$19.60 and closed at US$19.79. The fund previously closed Wednesday at US$20.21.

Meanwhile the SoFi 50 ETF (NYSE:SFYF) opened on Thursday at US$20.17 and closed at US$19.90, which is a 1 percent decrease. Wednesday’s previous close stood at US$20.04.

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Securities Disclosure: I, Dorothy Neufeld, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.