Roubini launches ETF to ward off Trump-era risk

Nouriel Roubini is seizing on Donald Trump’s inflation-threatening policy agenda to make a case for an alternative haven trade to Treasuries in a world of elevated volatility.

The economist, who built his reputation by correctly warning of a disaster ahead of the 2008 financial crisis, said the popular 60/40 portfolio is braced for pain once more, with Trump’s tariff plan — even just a “mild version” — threatening price stability.

Roubini is using his fame to market a solution to his long-standing bearish warnings, including the risk of a debased dollar and excessive debt load, with the launch of the Atlas America Fund Wednesday under the ticker USAF. 

The ETF will invest in climate-change resilient real estate investment trusts, inflation-protected US Treasuries, municipal securities, corporate bonds and gold trusts, among others, according to the prospectus. It will have an expense ratio of 75 basis points. 

The actively managed fund comes just as Wall Street braces for a new era of greater wild cards for financial markets, given the president-elect’s vow to break norms on everything from trade policy to Federal Reserve independence. All that risks eroding the diversification benefit of Treasuries in the event that stocks fall, reminiscent of the portfolio-hedging challenges during the pandemic.

“Over the medium term, inflation in the US and advanced economies are going to go gradually higher,” Roubini said.

“In a world where long rates may go higher, either because of inflation or because large debt and deficit imply higher real rates, that’s a world in which the defensive asset makes you lose money and sometimes makes you lose money more than the risky asset. And you have to find alternatives,” he added.

After cratering in the pandemic-spurred inflation fallout, the strategy of putting 60% of assets in equities and 40% in Treasuries has staged somewhat of a comeback, though the investing style snapped a five-month winning streak in October as the strength of the US economy spurred a bond rout.

The new fund will be the first ETF for Atlas Capital Team, a fintech company that Roubini co-founded to help develop investing strategies that protect against high-risk regimes including out-of-control inflation, climate change and civil unrest. 

Roubini, who also runs Roubini Macro Associates, is the latest in a long list of prominent economists and investors to attach their names to ETFs.

“We see this ETF as somewhat of an alternative long duration Treasuries,” he said. “You want a defensive aspect. But the traditional defensive aspect in a world of a variety of risks is not likely to be defensive.” 

Initial plans for the ETF were conceived during the first Trump administration, with the team tapping into growing concerns about the future role of the dollar in the global financial system as well as plans to further invest in America, said Reza Bundy, Atlas chief executive officer. 

The firm is currently in talks with Gulf-based sovereign wealth funds that are evaluating the need to adjust their US Treasury holdings but may want to keep their exposure to the US dollar.

“This instrument would be important for years to come given the debt load of the US and given the key dollarization movements that are occurring all over the world,” Bundy said.