Benefit from the Internet hype ?: New fund relies on Reddit revolution

Hobby gamers meet up on the Internet to drive up share prices – with success. A fund provider wants to ride this wave and offers investors a special financial product. The name is hip. But the composition is not particularly original.

While the attacks organized on the Internet platform are continuing, the financial industry also wants to benefit from Internet flash mobs. The latest example: the asset manager VanEck has launched an exchange-traded fund that is said to contain the US stocks that are particularly hyped on the Internet.

At least that is the claim. The ETF (abbreviation: BUZZ) follows the price development of the 75 stocks traded in the USA, for which "investor sentiment is most positive" on the Internet. This is supposed to be achieved by artificial intelligence, which scours Internet sources such as social media, news sites and blogs. "On Twitter, Reddit, Stocktwits and dozens of other platforms, communities of investors have formed who discuss stocks," the financial services provider "Bloomberg" quotes the head of VanEck's funds division, Ed Lopez. This has now become an alternative data source that should be used. "There's a lot of online chat every day," the company advertises. "Don't oversleep this!"

However, it is doubtful whether the fund will actually succeed in tracking the hottest trends. The index, the composition of which the ETF tracks, has at least one hip name: Buzz NextGen AI US Sentiment Leaders Index. But to get in there, companies must have a market value of at least five billion dollars – that excludes a large part of the stocks. In addition, the composition is only adjusted once a month. The fund is therefore nothing for the spontaneously emerging and short-lived flash mobs of hobby gamblers.

The gamestop attack would have bypassed the fund. In forums such as "Wall Street Bets" on the Internet platform Reddit, traders had agreed to buy shares in the video game dealer in order to jointly drive the price upwards. Since hedge funds had relied heavily on a falling share price, they had to buy Gamestop shares in order to limit their impending losses. The result: The price shot up – at times the plus was around 1,600 percent. But then it went steeply downhill.

Focus on tech stocks

Gamestop stocks are not currently in the ETF either. The largest position is Twitter, followed by the gambling providers DraftKings and Ford. The following stocks are not exactly original either: Facebook, Amazon, Apple, AMD, American Airlines, Netflix and Tesla. In other words, the fund is primarily betting on tech stocks that have rallied for months. According to Reuters, the Buzz Index has gained almost 80 percent in value in the past twelve months. The S&P 500 has grown by around 25 percent over the same period.

By the way, the idea is not new. The fund provider launched a similar ETF in 2016. But three years later he shut him down again for lack of interest. This time, however, the project should be a success. It is entirely possible that this will succeed. Because the internet community of hobby traders has received a lot of attention – and many investors hope to be able to benefit from it somehow.