The ETF Pioneer Who Calls Narratives Before Wall Street

Andrew Shannon’s ETF approach is built around identifying durable investment narratives before they become conventional market themes. He sponsored HACK, his first cybersecurity ETF, which launched on November 4, 2014; the Sony breach followed almost exactly two weeks later, when HACK was the only ETF offering pure-play cybersecurity exposure. In November 2012, he had created the world’s first junior silver ETF, based on the view that junior explorers could offer higher-beta precious-metals exposure than miners, and that silver tended to be higher beta than gold. At its peak, the fund may have held about $6 billion in assets.

Shannon says a theme is not enough: an ETF needs an index that captures both the investment idea and its longer-term prospects. Early-stage themes are hard to assess because companies can fail, be acquired, or lose ground through strategic decisions. That uncertainty shaped products such as Procure’s Big Data and analytics ETF, launched in 2015 when the concept was poorly understood, and its digital mobile payments ETF, which gained more traction. He also says pure-play drone companies were difficult to find when Procure was developing a broader drone strategy in 2016; if a proposed fund duplicates existing exposure, he would reject or defer it.

His space ETF thesis came from lower launch costs and more frequent launches, which made testing products in orbit more practical; rideshares could put those tests within reach for hundreds of thousands to just over a million dollars. For UFO, Shannon chose a passive strategy and an index co-developed with a former Space Foundation research director. At rebalance, at least 80% of the fund focuses on companies deriving at least 50% of revenue from space. He calls SpaceX transformational and likely the industry’s most important player by milestones and customers, but stresses that it is not the only company serving the market. UFO holds SpaceX shares directly rather than through a fee-charging liquid SPV.

Shannon sees SpaceX’s cost reductions as a force prompting competitors, including foreign companies, to build rival capabilities, but its vertical integration could also threaten partners and suppliers with replacement or acquisition. He says space-related stocks rose on SpaceX IPO rumors and social-media interest in proxies, then pulled back after the launch; he considered the pullback probably healthy and said the shares had since sold off, while emphasizing that space remains a real industry. He identifies military demand and national capabilities as major drivers, pointing to satellite imagery, jamming, Starlink communications for Ukraine, Russian restrictions on engine-part exports, and Russia’s seizure of a OneWeb satellite at Baikonur.

Shannon describes a second space race centered on occupying low Earth orbit and building national space capabilities. Growing congestion could make satellite approvals harder and accelerate launch demand: he says the FCC can require about half of a constellation to launch within the first couple of years or risk future approvals. Amazon’s Project Kuiper faces pressure to launch satellites, though the FCC could allow flexibility to preserve competition. The episode presents space as an industry where commercial growth and national-security priorities increasingly overlap.

Shannon says ETFs were designed for intraday liquidity, not early access to private companies, and that investors who enter a company only at a higher market capitalization may capture less percentage upside. Private-company exposure is now appearing in ETFs in response to demand, but he cautions that not everyone needs it and investors may miss much of a company’s value creation before access. He urges scrutiny of SPV fees and liquidity restrictions, including lockups that can prevent a fund from exiting even after a company goes public. His firm has also been approached about tokenization and is examining demand while recognizing the importance of anti-money-laundering and know-your-customer requirements.

Shannon’s move from market making into ETF creation began with studying prospectuses and spotting product opportunities; after a dispute involving Pure Funds, he says the funds were not recovered and he had to start over, leading him to conclude that future products required owning and operating the firm’s infrastructure. The business has since expanded into consulting and financial intellectual property, including work with early-stage private space and defense-tech companies. Shannon supports an Opportunity Zone-like policy to encourage US investment in defense tech, deep tech, space, and national security. The host likewise favors incentives for nuclear, defense, and other strategic technologies, while warning that government backing can support the wrong companies and that dependence on offshore supply chains can create vulnerabilities.