FX168 Financial News Agency (North America) News Warren Buffett created the B shares of Berkshire Hathaway Company almost 30 years ago to prevent fund managers from splitting the stocks of this high-priced conglomerate.
One of the largest retail brokerage firms in south korea is now planning to package Class B stocks into an etf with derivatives, which is another move that Buffett might not favor.
According to a regulatory filing, Kiwoom Securities Co. has partnered with Milwaukee-based Tidal Investments to establish an etf aimed at providing 200% daily returns of Berkshire.
This type of single-stock etf has swept through the fund industry, leveraging to increase potential returns (and losses) of high-yield companies like Nvidia Corp. and Tesla Inc. In south korea, brokerages such as Toss Securities and Mirae Asset Securities Co. have been seeking to capitalize on the growing demand for us stocks amid the sluggish performance of the domestic stock market.
Tidal's Chief Revenue Officer Gavin Filmore stated in an interview: "Traditionally, much of the interest and asset flow in leveraged etfs is concentrated in more volatile stocks. Berkshire is almost the complete opposite."
Leveraged etfs are typically suitable for active traders who only want to bet on stock performance that doesn’t exceed one day, as these funds usually deviate from their path when tracking stocks over the long term. Using derivatives to enhance Berkshire's returns may not align with Buffett's wishes, as he once referred to it as a "mass destruction financial weapon."
While Buffett's company is a well-known brand, intraday tradingIt remains to be seen whether investors are interested in using this leverage strategy to invest in stable stocks like this. Buffett is known as the ultimate long-term investor, and he advises people to hold stocks they are willing to hold for many years.
The 94-year-old Buffett and his company have followers in south korea. According to data compiled by the Korea Securities Depository, as of November 8, individual investors in south korea held more than $0.8 billion worth of Berkshire Class A and B stocks.
Bloomberg intelligence insurance analyst Matthew Palazola stated that the asian market is "very interested in Berkshire."
A representative from Kiwoom declined to comment. A representative from Berkshire did not respond to requests for comments.
Individual investors in south korea have embraced some of the largest leveraged etfs listed in the usa. According to custody data, the single-stock etf Direxion Daily TSLA Bull 2X Shares has garnered $0.225 billion from individual investors in south korea so far this year, and as of November 8, their total holdings in this etf have increased to $1.2 billion.
While the well-known Kick BRK 2X Long Daily Target will become the first single-stock etf for Berkshire in the usa, several other etfs are trading overseas. Nevertheless, they have failed to gain much followership: the assets of Leverage Shares 2x Long Berkshire Hathaway ETP Securities trading on several european exchanges amount to only about $2.3 million.
Kiwoom's new etf will purchase Berkshire Class B stocks and then issue its own shares to investors, which may be priced well below the closing price of $467.36 per Class B share on Monday. To expand its exposure to Berkshire's daily returns, this etf will enter into swap trades with brokerages and trade listed options of the company's Class B shares based in Omaha, Nebraska.
The Berkshire etf will be Kiwoom's product, with Tidal operating behind the scenes in exchange for a portion of the management fees.
Defamation.
Wall Street has worked to create an early version of a single stock fund for Berkshire stocks, prompting Buffett to create the company's Class B shares nearly thirty years ago. At that time, Berkshire only had one class of stock that traded for over 30,000 dollars, and the etf was still in its infancy.
In 1995, Philadelphia politician Sam Katz submitted documents to create unit investment reits, a fund-like tool that first purchases a fixed portfolio of stocks and bonds, then holds the securities for a period of time. He wrote that the reits would provide a "convenient and affordable way to obtain common stock of Berkshire Hathaway without having to own the full shares."
Katz stated in an interview that Berkshire threatened to stop the reits by splitting the stock, establishing its own reits, or creating a second class of stock.
Buffett fulfilled the last threat by issuing Class B shares equivalent to 1/30 of Class A shares. Investors rushed to purchase the new shares, rendering trust like Katz's obsolete.
In a letter to shareholders in 1996, Buffett warned that such reits are these "expensive" assets, which brokers would "heavily market to inexperienced buyers" to earn hefty commissions. This would burden Berkshire with "hundreds of thousands of dissatisfied indirect owners (i.e., trustees) and the burden of damaged reputation."
Katz said he had no regrets: "You know how many people can match up with Warren Buffett?"
