Buffett’s Berkshire Is Being Packaged Into a Leveraged ETF
In This Article:
(Bloomberg) -- Warren Buffett created Berkshire Hathaway Inc.’s Class B shares almost 30 years ago to stymie money managers who sought to split the high-priced conglomerate’s stock.
Most Read from Bloomberg
-
No Water by Year-End for This Zimbabwean City of 700,000 People
-
Arizona Elections Signal Robust Immigration Enforcement Under Trump
-
Scoring an Architectural Breakthrough in Denver’s RiNo District
One of South Korea’s largest retail brokerages now plans to package the Class B shares into an exchange-traded fund turbocharged with derivatives, another move that Buffett might not like.
Kiwoom Securities Co. teamed up with Milwaukee-based Tidal Investments to form an ETF designed to provide 200% the daily performance of Berkshire, according to a regulatory filing.
Single-stock ETFs such as this have been sweeping the fund world, using leverage that amps up the potential returns — and losses — of high-flyers such as Nvidia Corp. and Tesla Inc. In South Korea, brokerages such as Toss Securities and Mirae Asset Securities Co. have been seeking to capitalize on rising demand for US stocks amid sluggish performance by domestic equities.
“Traditionally on the leveraged ETFs, the lion’s share of the interest and asset flow has been on the more volatile names,” Gavin Filmore, chief revenue officer for Tidal, said in an interview. “Berkshire is almost the polar opposite.”
Leveraged ETFs are often meant for active traders who want to bet on a stock’s performance for no more than a single day, as these funds typically veer off course when tracking shares over a longer period. The use of derivatives to juice Berkshire returns might not sit well with Buffett, who once called them “financial weapons of mass destruction.”
While Buffett’s firm is a well-known name, it remains to be seen whether day traders will have an appetite to ride a steady stock such as this one with this type of leveraged strategy. Buffett is known as the ultimate long-term investor who advises people to own stocks they’d be comfortable holding for years.
Buffett, 94, and his firm already have a following in South Korea. As of Nov. 8, individual investors in South Korea owned more than $800 million worth of Berkshire Class A and Class B shares, according to data compiled by the Korea Securities Depository.
Asian markets “have a penchant for Berkshire,” said Matthew Palazola, an insurance analyst at Bloomberg Intelligence.
The ETF listing is not finalized yet and Kiwoom is waiting for the approval by Korea’s Financial Supervisory Service, the country’s financial watchdog, Kiwoom said in response to a Bloomberg query. Representatives for Berkshire didn’t reply to a message seeking comment.