Roundhill relaunches Meme Stock ETF on retail trading hot streak

00:00 Speaker A

Well, Roundhill Investments relaunched its meme ETF yesterday, hoping to capitalize on the current speculative stock frenzy.

00:07 Speaker A

Joined by friend of the show, Dave Mazza, Roundhill Investments CEO, to talk more about this.

00:13 Speaker A

Hey Dave, good to see you. I got your email. I had to do a double take on the relaunching of meme.

00:18 Speaker A

I I first I got to ask the elephant in the room. Is this a top then? If you’re if you’re relaunching the meme stock uh ETF, is that mean, you know, we’re we’re you know, that bubble that we were just talking about is on the verge of bursting?

00:30 Dave Mazza

Well, I don’t think the launch of an ETF is emblematic that there’s uh necessarily a top in the market. I think it’s more of a reflection that retail investors play a structural role in equity markets today.

00:43 Dave Mazza

Uh we know that uh prior to COVID, retail investors uh were frankly not that important when it comes to price setting for stocks.

00:51 Dave Mazza

Now on any given day, up markets, down markets, they represent somewhere between 15 to 20% of total traded value for US stocks.

01:02 Dave Mazza

And with that being the case, uh we decided to relaunch meme to actually embrace the power of retail and embrace the potential for meme stocks to actually have the ability to continue to outperform based off of their inherent characteristics.

01:17 Speaker A

And Dave, do you think you were just too early with it before? I mean it didn’t gain a sustainable amount of assets and so that’s why you guys closed it in 2023. Um, were you just too early and what kind of lessons did you learn from the first go round?

01:33 Dave Mazza

Yeah, I think the 2024 market environment from an economic perspective, from a markets perspective, it’s very different than 2021, even 2022, 2023.

01:43 Dave Mazza

So when we were thinking about relaunching meme, we actually decided to take a very different approach.

01:49 Dave Mazza

Um so the prior version was actually an index-based fund, so passively managed, tracking an index that tried to screen for social sentiment and then focused on stocks also with high short interest to identify a portfolio of potential meme stocks.

02:00 Dave Mazza

One of the challenges with that is that it can lead it led to corner solutions.

02:06 Dave Mazza

So stocks that may actually not really be memeable, but just had those characteristics.

02:12 Dave Mazza

In this particular case, we’re taking an active approach.

02:16 Dave Mazza

So we use uh measures like implied volatility to identify the universe of stocks, and then use uh qualitative metrics uh like social sentiment uh and screening of online communities and others to identify that basket.

02:27 Dave Mazza

The other thing that active management brings is more agility and dynamicism in the portfolio. So it is actually going to be rebalanced at least weekly, if not more frequently, to identify meme stocks as they emerge quickly.