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Big problems require big solutions. And big ETFs. Very big ETFs.
On Wednesday, DWS Xtrackers listed its MSCI USA Climate Action Equity ETF (USCA) on the New York Stock Exchange. The climate-focused exchange-traded fund holds some $2 billion worth of assets, making it the biggest ETF launch of all time -- by far.
Big, Bigger, Biggest
Like cherry blossom blooms, launching the largest-ever exchange-traded fund is becoming an annual April tradition. Last year, the Goldman Sachs MarketBeta US 1000 Equity ETF (GUSA), which provides "efficient and diversified access" to the largest 1,000 US companies, launched with a then-record $1.35 billion in assets. A year earlier came BlackRock's US Carbon Transition Readiness ETF (LCTU), with $1.2 billion in assets.
Massive, climate-focused ETFs are not novel. But they don't exactly have a strong track record, either:
- LCTU has seen scant growth since its launch, now holding around $1.4 billion in assets, and its share price is down roughly 5% since its launch. "It's got anchor institutional investors that have stayed loyal but the fund hasn't received broader investor adoption," Todd Rosenbluth, head of research at financial consultant VettaFi, told the Financial Times.
- Meanwhile, the BlackRock World ex US Carbon Transition Readiness ETF (LCTD), which launched on the same day in April 2021 as LCTU, has seen its assets shrink from $500 million to $468 million.
Climate-Changing Opinions: "In the US there is a negative sentiment building toward environmentally friendly ETFs," Rosenbluth said. "A successful launch with the support of a large institutional investor to a targeted approach can be a factual counterpoint that might shift the narrative." In other words, DWS is hoping that when it comes to climate ETFs, you can go green as long as you go big.
