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Defiance CEO to differentiate his Disruptive Tech ETF from ARK

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(Bloomberg) – Escaping the shadow of Cathie Wood and ARK Investment Management is hard enough in the theme fund industry. Imagine if you’re one of the few other female CEOs of America’s $7 trillion exchange-traded fund industry — one who also pursues disruptive tech bets.

Sylvia Jablonski is fearless. The new CEO of Defiance ETFs says her $1.5 billion company already stands out thanks to its shorter-term investment horizon — ARK invests over five years — and its asset mix.

Now she plans to further differentiate the company from its ETF rivals with an expansion into the crypto space, the 43-year-old said in an interview. It could bring new competitors — think Grayscale Investments and Bitwise Asset Management — but Jablonski believes there’s no such thing as Defiance.

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

Although she declined to divulge specific details, the new CEO said she plans to bolster Defiance’s lineup of eight ETFs with funds focused on “dynamic disruptive trends.”

It’s a tough time to lead a thematic fund provider. A Brown Brothers Harriman survey published this month showed that 38% of ETF investors plan to allocate up to a fifth of their portfolio to thematic strategies – which track trends such as space exploration and robotics – over the next five years. But research continues to question the long-term performance of these fad trades.

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

Wood and ARK, once standard bearers of the arrow, now represent the bust. Flagship ETF ARK Innovation (ticker ARKK) is down nearly 30% year-to-date.

Defiance ETFs generally performed a little better. Most of the assets are in the $1.2 billion Defiance Next Gen Connectivity (FIVG) ETF, which is down about 8.5% in 2022 and has seen outflows of about $107 million on the same period.

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

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

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

The company was the first in the US to launch a psychedelic ETF – the Defiance Next Gen Altered Experience ETF (PSY). He also owns the Defiance Quantum ETF (QTUM) and the Defiance Digital Revolution ETF (NFTZ), which invests in crypto mining and blockchain technology companies.

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