Advisor Ross Gerber, president and CEO of Gerber Kawasaki Wealth and Investment Management, a $2 billion registered investment advisor in Los Angeles, is launching an actively managed exchange traded fund, with AdvisorShares as the sponsor. The AdvisorShares Gerber Kawasaki ETF (GK) starts trading on Friday.
The portfolio, subadvised and managed by Gerber, will invest in growth companies he believes are set to benefit from long-term changes occurring in a post-COVID economy. It will give investors access to Gerber’s best stock ideas across nine investment themes he predicts will benefit in the "roaring '20s": climate change, technology frontiers, video gaming and esports, top consumer brands, pet and animal wellness, innovation in health care and biotechnology, real estate disruption, streaming sports and entertainment, with a dose of firms peddling in things that used to be illegal, such as cannabis, online gambling and sports betting.
Gerber, a believer in active management, is a widely followed commentator among investors, with frequent appearances on business shows and more than 159,000 followers on Twitter. He’s been an outspoken investor in Tesla, in particular, and computer systems design services company Nvidia, both of which are top holdings in the ETF. The ETF has a net expense ratio of 81 basis points.
“We’ve always been stock pickers at our firm, during a period of time where most people sort of bought into the robo-advisor, broad index fund investment philosophy,” Gerber said. “When we started our firm 11 years ago, we started tracking very closely our individual stock selection versus our indexes and building our portfolios, and we found that over the last 11 years, we had an excellent track record.”
Gerber said his firm has seen rapid growth in clients seeking to tap into his stock picking expertise, especially earlier this year as the GameStop debacle brought a lot of new investors into the market. He says it took his firm 10 years to get to $1 billion in assets, but it has grown by another $1 billion over the past 18 months. Investors are still knocking on his door to get investment advice, he says, but his firm has reached capacity. The ETF will give more investors access to his ideas, he says.
“We have reached the maximum amount of clients we can take per week,” he said. “So the idea came, how do we engage all the people on all the platforms?”
“If you like him, and you like his thought process with investing, you can invest in this,” said Noah Hamman, CEO of AdvisorShares. “You don’t have to fill out a bunch of paperwork. You don’t have to be a client. You can do it for $1, or you can do it for $10 million. This really solves that problem for him, as he’s continuing to grow.”
Gerber also points to the tax efficiency of the ETF, a particular advantage for an actively traded portfolio.
“When ETFs were fully explained to me, I realized, ‘Why aren’t people actively managing ETFs when you can actually defer taxes on gains through the way ETFs work? This is a huge advantage,’” he said. “Essentially, we can invest and trade tax deferred for our clients if we build an ETF structure, and so we did it.”
Todd Rosenbluth, director of ETF and mutual fund research at CFRA, said more RIAs and investment advisors are using the tax efficiency and liquidity of ETFs to run their investment strategies in a scalable way. He points to the Merlyn.AI family of ETFs, the Gadsden Dynamic Multi-Asset ETF and Main Management, as examples.
“A relatively high turnover strategy can become tax efficient using the ETF structure through the creation and redemption process, assuming there’s enough action and volume in the ETF,” Rosenbluth said. “Actively managed equity ETFs are extremely tax efficient relative to mutual funds or separately managed accounts.”
Another big investor in Tesla is Cathie Wood’s ARK Innovation ETF (ARKK). And while Gerber’s ETF will invest in some of the same themes, such as technology and climate change, he said it’s not meant to compete with ARKK. While ARK’s ETFs each have a narrower focus, Gerber’s portfolio is multithematic, and meant to be a core portfolio for someone’s IRA, for instance.
“My fundamental philosophy of the stock market is very different than theirs,” Gerber said. “We wanted to create a core growth fund for people’s portfolios, their IRAs, that is consistent. Our clients don’t want volatility.”
For instance, because Tesla is such a large part of ARKK’s portfolio, if the stock is out of favor, the ETF doesn’t perform.
“We are big Tesla investors too, but our fund won’t rise and fall just based on Tesla,” Gerber said. “But if you own ARK Innovation, you better hope Tesla does well. You better hope Elon’s sober.”
“This is not a ‘get-rich-quick’ ETF. This is an ETF for someone’s IRA or their core money, so that they can have a smooth ride up. And if I can kill it over the next decade, everybody will benefit.”