If investors needed another sign the heyday for meme stocks has passed, an exchange-traded fund designed to ride the pandemic-era rise of retail traders is shuttering after just two years.
Roundhill Investments announced last week that it will liquidate the Roundhill MEME ETF (ticker MEME) in December, along with two other funds. MEME — which screened companies based on social-media activity and short interest — had accumulated just $2.6 million in assets since and is trailing the benchmark S&P 500 by around 60% since its December 2021 inception.
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So-called meme stocks entered the lexicon in 2021 as legions of retail traders convened on social media to orchestrate massive short squeezes in the like of GameStop Corp. and AMC Entertainment Holdings Inc., fueling triple-digit rallies in some cases. Issuers were quick to latch onto the craze, but funds such as MEME and the $57 million VanEck Social Sentiment ETF (BUZZ) have struggled to gain an audience.
“A 2021 phenomenon wrapped into an ETF simply doesn’t work in today’s environment,” said Nate Geraci, president of The ETF Store, an advisory firm. “A niche strategy, zero financial adviser participation, and massive underperformance is a classic recipe for ETF closure.”
A slew of retail-focused ETFs launched during the height of the pandemic as Wall Street issuers rushed to capitalize on the extremely active day-trading crowd flush with government stimulus. But that frenzy has since declined as the Federal Reserve launched its most aggressive monetary policy tightening in decades. Industry experts said it’s no surprise that such funds — born in the crowded $7.5 trillion ETF space in which more than 3,330 US ETFs already exist — are struggling.
To be sure, retail traders are alive and well in equities, as well as other corners of the market including zero-day options and foreign currency trading. Just this month, investors piled into the shares of bankrupt companies, WeWork Inc. and trucking company Yellow. Their force is just not of the same magnitude as during the pandemic. Retail traders last month sold nearly $16 billion in stocks, according to S&P Global Market Intelligence, a selloff that reveals fading enthusiasm for equities from day traders.
Read the full article here by Katie Greifeld, Isabelle Lee of Bloomberg News, Advisor Perspectives
