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Defiance CEO to Set Her Disruptive Tech ETF Apart From ARK

(Bloomberg) — Escaping the shadow of Cathie Wood and ARK Investment Management is tough enough in the thematic-fund business. Imagine if you’re one of the few other female CEOs in the $7 trillion U.S. exchange-traded fund industry — one who’s also chasing disruptive tech bets.

Sylvia Jablonski is undaunted. The newly installed chief executive officer of Defiance ETFs says her $1.5 billion firm already stands apart thanks to its nearer-term investing horizon — ARK famously invests for five-years out — and asset mix. 

Now she plans to further differentiate the firm from ETF rivals with expansion in the crypto space, the 43-year-old said in an interview. That could bring new competitors — think Grayscale Investments and Bitwise Asset Management — but Jablonski reckons there’s nothing like Defiance.

“We’re not quite ARK and we’re not quite Grayscale or Bitwise,” she said. “We’re going to be a well-diversified fintech asset management firm with an active digital asset crypto business, a booming thematic ETF business and have multi-billion dollars of assets under management.”

While she declined to disclose specific details, the new CEO said she plans to bolster Defiance’s eight ETF lineup with funds that home in on “dynamic disruptive trends.” 

It’s a difficult time to lead a thematic-fund provider. A survey by Brown Brothers Harriman released this month showed 38% of ETF investors planned to allocate up to a fifth of their portfolio to thematic strategies — which follow trends like space exploration and robotics — in the next five years. But research continues to question the long-term performance of these fashionable trades.

Following a pandemic-fueled boom, thematic ETFs have struggled in 2022 as volatility hit equity markets. Without inflows of $2.1 billion in March, the cohort would have suffered net outflows of more than $500 million this year, according to Bloomberg Intelligence.

Wood and ARK, once standard bearers of the boom, now represent the bust. The flagship ARK Innovation ETF (ticker ARKK) is down almost 30% year-to-date.

The ETFs at Defiance have mostly fared a little better. Most assets are in the $1.2 billion Defiance Next Gen Connectivity ETF (FIVG), which is down about 8.5% in 2022 and has posted about $107 million outflows over the same period.

“A lot of investors are spooked because of the current market volatility, rate hikes, geopolitics, and are on the sidelines or have cashed out,” said Jablonski. “A lot of times they will sell their thematic ETFs first, to raise money. I think that will change in time.”

Jablonksi, Defiance’s chief investment officer for a little over a year, was named CEO earlier this month after Matthew Bielski stepped down to take up the same post at parent company Defiance Group Holdings. She joined the firm after 11 years at Direxion, where she was a managing director. 

Defiance is on the map because of its “fantastic early tickers” and its ability to launch funds in certain niches before bigger issuers swoop in, according to James Seyffart, ETF analyst at Bloomberg Intelligence. 

The firm was the first in the U.S. to launch a psychedelics ETF — the Defiance Next Gen Altered Experience ETF (PSY). It also boasts the Defiance Quantum ETF (QTUM) and the Defiance Digital Revolution ETF (NFTZ), which invests in crypto mining and blockchain technology firms.

“Some of the sectors we are telling investors to focus on are taking off right now,” said Jablonski. “We’re not saying you have to wait 10 years.”

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