The ETF Pioneer Who Calls Narratives Before Wall Street

Summary

• Chanin’s approach is launching the ETF before the narrative breaks: HACK, the first cybersecurity ETF, went live November 14, 2014 — “almost exactly two weeks before the Sony breach,” allegedly because North Korea was upset with Sony Pictures over The Interview. Overnight, “everyone realized, hey, cybersecurity might be something I want exposure to… that was the only ETF in town.” The same instinct produced the world’s first junior silver ETF in November 2012, which he thinks may have reached up to ~$6B in assets at its high point — and, too early, the first AI/big-data ETF under ticker BIGD in 2015, which attracted less interest commercially even though “the index probably did pretty darn well.”
• Space has become a defense trade, and that’s the durable leg of the UFO thesis. “Space is viewed as strategic high ground for militaries at this moment and potentially, and likely, moving forward… without space, your military is basically obsolete compared to the global superpowers.” His proof chain is the Russia-Ukraine conflict: Maxar imagery of the troop buildup preceded the invasion, followed by satellite jamming, Starlink communications, Russia banning engine-part exports, and Russia taking significantly British-government-owned OneWeb satellites hostage at Baikonur.
• The post-SpaceX-IPO selloff is “probably healthy” — the run-up was Reddit traders chasing proxies, and SpaceX itself traded back near its first-trade and IPO prices, depending on the day. UFO bought shares outright after the IPO, while Chanin believes some other ETFs still hold pre-IPO exposure through “an illiquid SPV that’s charging high fees… even after it’s already IPOed.” He calls SpaceX probably the biggest, most important player, but not the only show in town: other companies fill other parts of the market. Supplier baskets also face the problem that “Elon loves to vertically integrate” — suppliers may be replaced with in-house solutions or acquired if the price is right.
• There’s a scarcity trade in low Earth orbit: FCC approvals can require launching roughly half a constellation within the first couple of years or potentially forfeiting all future satellites — a rule Amazon’s Project Kuiper is “significantly battling with” and one that pulls launch demand forward. He sees “two Space Race 2.0s” — orbit real estate and nations — and unlike the vanity-project original, “the winners of these next couple decades could potentially put themselves in a place where they are leaders for multiple decades to come.”
• The PureFunds saga taught him the industry’s hardest lesson: own your infrastructure. Despite a favorable Southern District of New York judgment, with NASDAQ on his side of the table against the white-label provider, “we were never able to get those funds back” — so ProcureAM was built so no one could “just take them away from us… I had to start from scratch.”
• His edge is doing the work nobody does — “no one wants to read a prospectus” — and a strict pure-play discipline: at least 80% of UFO at rebalance sits in companies with ≥50% space revenue, most 90–100%, and if a new fund has the same holdings, overlap, and correlation as existing aerospace-and-defense ETFs, “are you really providing anything to the marketplace?” If not, he passes.
• What’s next: stealth products he calls potentially “transformational,” a look at tokenization with AML/KYC “ridiculously important,” and a policy pitch — Opportunity-Zone-style incentives for U.S. investors and companies in defense tech, deep tech, and space, which he calls “one of the greatest policies our government could put forward” — incentivizing investors rather than creating “another Solyndra.”

Deep dive

1. The pattern: launch the ETF two weeks before the world notices

• Chanin’s origin story is almost too clean: HACK, the first cybersecurity ETF, launched November 14, 2014 — “almost exactly two weeks before the Sony breach,” allegedly because North Korea was very upset with Sony Pictures over The Interview. When the hack hit, “all of a sudden everyone realized, hey, cyber security might be something I want to get exposure to… we had the only ETF in town.”
• The earlier specimen of being early: the world’s first junior silver ETF, November 2012, built on a beta ladder — miners are a beta play on the metal, juniors a higher-beta play, and silver itself “tends to be that higher beta play on gold.” He thinks it may have reached up to about $6 billion in assets at its high point.
• The slower commercial launch that illustrates the timing risk: the first AI ETF concept, eventually ticker BIGD (big data and analytics), around 2015 — “people didn’t really understand the theme at that time,” while sibling IPAY, the first digital mobile-payments ETF, took off. His retrospective: “looking back, I think the index probably did pretty darn well.”
• His durability test for themes, as told: don’t launch the MP3 ETF — “then you would have launched the cassette tape ETF and then the CD ETF. No, what’s the theme there? Maybe it’s audio or music.”

2. From AMEX floor arbitrage to reading what no one reads

• Chanin hit the American Stock Exchange floor straight out of college in 2007, became lead market maker for global and international equity ETFs, and watched the global financial crisis arrive. The formative exchange: he told his boss, a floor veteran since the ’80s, “this is crazy, I’ve never seen anything like this” — and the boss replied, “neither have I.”
• The mechanics he learned: sell ETF shares above the cost of the underlying basket, deliver the basket at day’s end, and lock the spread — and with international ETFs whose components trade in closed Asian and European sessions, pricing became a “geopolitical global macro perspective on markets.”
• Avi’s parallel from his own crypto arbitrage days — worth keeping: you start “picking up pennies,” then realize “the entire industry is going up… I probably am going to make a lot more money with a lot less effort if I just actually look at the big picture.”
• Chanin’s edge story, as told: a Smith Barney branch manager read the retirement tax code that nobody read and took one of the people who helped write it to lunch for “a tuna salad or an egg salad sandwich.” Chanin’s version: “no one wants to read a prospectus” — so he did, kept feeding ideas to issuers, until a Global X principal asked, “why do you keep giving us your ideas? Try launching your own.”

3. The PureFunds fight: win the judgment, lose the funds, build your own rails

• Avi’s framing — that Chanin “got into a fight with NASDAQ” — gets corrected immediately: “NASDAQ and I are friends to this day.” NASDAQ had acquired his original partner, the International Securities Exchange’s ISE ETF Ventures, and both sat on the same side against his white-label provider; the record is “a very lengthy judgment in the Southern District of New York.”
• The brutal outcome despite a favorable judgment: “fortunately the judge ruled in our favor… unfortunately, we were never able to get those funds back.” The lesson that built ProcureAM: “we need to own and operate our own infrastructure… never going to put ourselves in a position where we created these funds, took the financial risk behind them, and let someone just take them away from us.”

4. UFO: a pure-play space fund with a methodology he’ll defend

• The catalyst was reusable rockets significantly reducing the cost of accessing space and speeding launch cadence by avoiding the need to rebuild a brand-new spacecraft each time. Someone building in a garage might now get a rideshare payload slot for “a couple hundred thousand dollars, a little over a million dollars… that was truly revolutionary” — opening space to companies that would never have considered it.
• The index’s provenance is part of the pitch: it was co-developed by the former director of research at the Space Foundation, who helped build the model used to calculate the size and growth of the global space economy for the annual Space Report. The nonprofit then realized it could not offer an index selecting companies for financial firms and told him to take it and do what he wanted with it.
• The discipline: at least 80% of the fund at rebalance is focused on companies generating ≥50% of revenue from space, with most pure-play names “closer to 90 to 100%.” And the overlap test for any launch: if your space ETF has the same holdings, overlap, and correlation as existing aerospace-and-defense funds, “are you really providing anything to the marketplace? If the answer to any of those questions is no, I’m going to pass.”

5. Post-SpaceX IPO: froth cleared, thesis intact

• Space stocks ran up from late December, when the IPO rumor hit and “Reddit traders and thought leaders” piled into space proxies; now SpaceX has traded back down to around where its first trades were, closer to the IPO price depending on the day. His read: “that’s probably healthy.” The attention was “absolutely deserved” — SpaceX is pushing competitors globally and driving down launch costs; China had just announced a successful vertical landing and catch of one of its craft’s stages.
• Chanin views SpaceX as probably the biggest and most important player in space, serving governments, militaries, commercial customers, and its own projects, but says it is not the only show in town. Other companies are fulfilling other parts of the market.
• His structural critique: Chanin believes some ETF companies still hold private SpaceX shares through SPVs — “an illiquid SPV that’s charging high fees just to still have this exposure even after it’s already IPOed. It’s kind of wild.” UFO bought shares outright post-IPO.
• On SpaceX-supplier basket strategies: “Elon loves to vertically integrate.” SpaceX may replace suppliers with in-house solutions or acquire them if the price is right.

6. Militarization and two Space Race 2.0s

• The second pillar of the thesis is militarization. Chanin says “space is viewed as strategic high ground for militaries at this moment and potentially, and likely, moving forward… without space, your military is basically obsolete compared to the global superpowers. If you want to compete and don’t want to rely on other people, you have to build up your own space industry. That’s not easy.” The Russia-Ukraine conflict made it visible: Maxar satellite imagery of the troop buildup before the invasion, then jamming, Starlink communications, Russia banning engine-part exports, and Russia taking significantly British-government-owned OneWeb satellites “hostage” at the Baikonur launch base in Kazakhstan.
• Race one is low Earth orbit scarcity: the FCC’s current process can require launching about half of an approved constellation within the first couple of years or potentially forfeiting all future satellites — “right now that’s something that Project Kuiper and Amazon is significantly battling with,” and it pulls launch demand forward. The FCC might provide flexibility to preserve competition against Starlink, but “there’s no guarantee.”
• Race two is among nations — the moon, orbiting space stations, and sovereign launch capabilities — and unlike the original space race’s “vanity project,” “these will have real ramifications and the winners… could potentially put themselves in a place where they are leaders for multiple decades to come.”
• Both speakers are the demand-side evidence: Avi just bought a Starlink because “if you’re in Europe, the internet is terrible… it’s changing my life”; Chanin stayed connected and kept working off Starlink when the July 4 storms knocked out both power and internet in the Tri-State Area until Tuesday or Wednesday.

7. Private markets, tokenization, and a policy pitch

• On companies staying private longer (SpaceX went public at ~$1.5 trillion, in Avi’s framing): “by no means do I think that’s an ETF killer.” Chanin notes ETFs were not initially created specifically to reach early-stage companies; their appeal included intraday liquidity in response to problems with mutual funds. Not everyone needs private access — “by the time you are able to get that access, maybe you’ve already missed a lot of that value creation” — but buyers must understand SPV fees, lockups, and illiquidity. ProcureAM has also expanded into consulting, financial IP, and work with early-stage private space and defense-tech companies.
• On tokenization, companies have approached ProcureAM about tokenizing things it does, and Chanin says the firm is working on “a bunch of stuff in stealth mode… that we think could be transformational,” with AML/KYC “ridiculously important.”
• His policy ask, aimed at any listening politician: Opportunity-Zone-style incentives for U.S. investors and companies to invest in early-stage defense tech, deep tech, space, national defense, and national security — “one of the greatest policies our government could put forward.” Avi’s supporting argument is that free-market offshoring may be economically good initially but can be socially and ultimately economically harmful if competitors gain choke points, as China did. Chanin’s guardrail: “we don’t need another Solyndra” — incentivize investors rather than have government pick companies.
• The imagination-expanding close: labs and garages are working on things like propellantless propulsion — “if any of these technologies become successful, you need to expand your imagination of what the space industry can become.”