The Anti-AI ETF’s Heavy-Weight Gamble on Infrastructure

The launch of Roundhill’s LOHA ETF in May 2023 has sent shockwaves through the financial world, offering an alternative to AI-dominated indices that have come to dominate passive equity portfolios. At its core, this anti-AI ETF is a bet on physical infrastructure – engines, trucks, air conditioners, and even gold mining.

The Case Against Code-Dependent Indices

LOHA’s creator, Josh Brown of Ritholtz Wealth Management, has coined the term HALO (Heavy Assets and Low Obsolescence) to describe companies whose value lies in tangible assets rather than code. This approach challenges the tech-heavy indices that have become ubiquitous in recent years, built on the assumption that software can be rewritten and repackaged at will.

Companies like Cummins, a leading engine manufacturer, are reaping the benefits of this approach. In its latest quarterly report, Cummins posted record Power Systems sales of $2.3 billion, up 19%, thanks to its direct sales to AI data centers. Similarly, AutoZone and Lennox offer entrenched distribution networks that are resistant to disruption.

A World of Entrenched Distribution

AutoZone’s vast network of stores provides a competitive advantage, allowing it to stock the right parts within a short drive of a mechanic who needs them today. Cummins’ multi-year agreement with hyperscalers can only be replicated with foundries, engineering depth, and permits that no model checkpoint can provide.

The Fiduciary Factor

LOHA’s sponsors are committed to fiduciary standards, prioritizing their clients’ interests over short-term gains. This commitment is reassuring for investors, who are increasingly turning to Advisor.com’s free matching tool to pair with vetted fiduciaries from major national firms.

The Infrastructure Imperative

In an era dominated by AI, LOHA offers a timely reminder that there’s still value in the physical world – even if it doesn’t come with the same level of hype as the latest software darling. With its 0.35% expense ratio and unitary fee structure, LOHA is designed to be a low-maintenance option for investors who want to own a piece of the world’s infrastructure.

As we move further into an era dominated by AI, LOHA will continue to attract attention from investors looking for a safe haven in uncertain markets. Its bet on physical infrastructure may prove to be a shrewd move, one that rewards those who prioritize tangible assets over code-dependent indices.