How Investors Can Get Ahead of the Next AI IPOs

Nicole Pedolides (0:00)

Welcome back to The Watch List. I'm Nicole Pedolides. Time now for the ETF Watch List, and joining me is Jeff Weniger, Chief Investment Strategist at Corgi Invest. I'm so glad you're with us. People are watching for Anthropic, possibly before Thanksgiving, OpenAI next year, and we're talking about getting some exposure here ahead of the IPOs. What do you mean? Tell us about what's going on there in your world at Corgi.

Jeff Weniger (0:27)

Thanks, Nicole, I appreciate it. We just launched one the other day, ticker symbol MN, and it owns Anthropic and OpenAI, as you pointed out. It's the new fangs slash Mag7 concepts.

We have this ETF that we launched months ago called CMag. It's our Magnificent 7 It's at 20 basis points, and we suspect perhaps mangoes could be the next acronym that takes hold. Really, if you think about the Mag7, it's kind of like a hodgepodge of Silicon Valley companies. But mangoes, which is Meta, Anthropic, Nvidia, Google, so that's the G, I guess we call that alphabet, OpenAI and SpaceX, these are truly six AI plays in there. It's another one at 20 bits, and we're trying to see if we can corner the market here on these AI-concentrated mandates.

Nicole Pedolides (1:20)

So I think about Anthropic. I know we've had a lot of discrepancies about OpenAI in the last 24 hours, but let's start with Anthropic and the position that people can have, will have. Are you bullish on Anthropic at this point now, and that's why you have it in the ETF?

Jeff Weniger (1:39)

Well, I think the rationale behind owning Anthropic in an ETF structure is really this concept that we've been batting around here at the firm, and here in society really is this omission risk whereby if this was, you're just talking in the last segment, prior eras, IPO booms or lack thereof. The reality is, is you got all these companies now getting up to about a trillion dollars or more before the IPO, and you get to the point where, well, what if you wanted to own the thing?

What if you want it? Well, tough luck, tough luck unless you were in early stage VC or you have friends in Silicon Valley. If you think about it, if you took a total global market cap, you added US equities plus European equities plus Chinese and so on, added up the total global market cap, you're underweight, you're underweight Anthropic and Open AI by nature of, whoops, you gotta wait for the IPO. So I don't know if the IPOs are gonna be hot or cold. I mean, they can rally in anticipation of the IPO and then flatline or fall. That's what SpaceX did. And SpaceX made all of its money before the IPO. But the reality is is basically everybody under the sun is underweight OpenAI and Anthropic. And mangoes would be a way to synthetically gain some exposure to the return of those names. I think that that's really the approach of the mandate.

Nicole Pedolides (3:01)

And so I think about now when I'm looking at Meta, 21% of the top holdings, OpenAI 6%, Anthropic 6%. So even with those combined, you still have some of the established names really running the show here.

And I think that's an important point where you have Anthropic, NVIDIA, SpaceX, all 20%. And so this smaller portion is the exposure. Why did you do it that way? Why didn't you make Anthropic and OpenAI bigger? Is that to be more cautious?

Jeff Weniger (3:35)

Well, there's also regulators involved, right? In terms of with an ETF structure, putting illiquids, putting privates in there, you're capped at 15%.

Those two, Anthropic and OpenAI, are about six-ish each there inside of it. So they're about 12% total. And it's long only. You're using total returns swaps. You don't own the equity, right? You're getting the exposure via the total return swaps. And so look, those names could end up declining, right? I mean, stocks go up and stocks go down. And you have about 6% each. And that's actually some of the higher proportions for those two names in any ETF structure. Many of the other structures have it in an SPV and it's very low single digits. So yeah, it's generally most of it's the top four that the household names and it's concentrated. It has six names in there. So it's something that can slide in as a little sliver of a portfolio so that if you weren't bullish on open AI and Anthropic, then you can have some of that exposure and not have to wait till mid-November for Anthropic. And what do you think? First quarter, maybe first quarter for open AI?