Direxion has continued the buildout of its thematic lineup with the launch of the Direxion Hydrogen ETF (HJEN US), providing exposure to companies operating within the ‘hydrogen economy’.
Hydrogen-based energy is expected to be critical in achieving net-zero carbon emissions.
The term hydrogen economy encapsulates a vision of a clean energy future in which the pre-eminent energy source is hydrogen. It envisions the widespread use of hydrogen as a fuel for heating and powering vehicles, and in energy storage.
According to Direxion, the hydrogen economy is expected to be critical in achieving net-zero carbon emissions by providing a more accessible, efficient, and sustainable energy solution.
David Mazza, Managing Director at Direxion, said: “Hydrogen is the lightest and most abundant element in the universe, and it may be the key to fulfilling the world’s growing energy needs while fighting climate change.
“With the launch of the Direxion Hydrogen ETF, investors now potentially have diversified exposure to the companies powering today’s dynamic hydrogen economy.”
The fund has listed on NYSE Arca and comes with an expense ratio of 0.45%.
Methodology
The fund is linked to the Indxx Hydrogen Economy Index which selects constituents from a universe of stocks listed in developed or emerging markets, excluding India. Companies must have market capitalizations above $100 million and average daily trading values greater than $1m to be eligible for inclusion.
The methodology uses the FactSet Revere Industry Business Classifications System (RBICS) to screen for companies with ‘pure-play’ exposure to the hydrogen economy. This involves identifying firms that derive more than 50% of their revenue from industries linked to hydrogen production, hydrogen storage and supply, fuel cells and batteries, hydrogen systems, and membranes and catalysts.
The 30 largest eligible companies are selected to form the index. If fewer than 30 pure-play companies exist, the methodology reduces the revenue threshold in stages until the constituent count is reached.
Constituents are weighted by float-adjusted market capitalization subject to a single stock cap of 8% and an aggregate cap of 45% on all stocks with weights above 5%. Additionally, the methodology limits the aggregate weight of non-pure-play companies depending on the number of these companies that are included in the index – this could range from an aggregate cap of just 10% when there are less than six non-pure-play companies in the index to 40% when the count is over 12.
As of the end of February, stocks from the US accounted for just over half (51.0%) of the index exposure with the next-largest country weights being Japan (9.7%), the UK (9.0%), Norway (6.9%), and South Korea (6.9%).
Notable positions included Plug Power (11.9%), FuelCell Energy (10.8%), Ballard Power Systems (8.9%), Bloom Energy (7.0%), NEL (6.9%), ITM Power (4.8%), and ENEOS (4.7%).
Similar funds
The price tag of the Direxion fund is slightly higher than that of the only other US-listed hydrogen economy ETF – the Defiance Next Gen H2 (HDRO US) – which costs 0.30%. This fund, which launched earlier in the month, tracks the BlueStar Global Hydrogen & Next-Gen Fuel Cell Index, targeting global pure-play companies involved in hydrogen and fuel cell projects or the development of hydrogen and fuel cell technologies.
European investors can access the hydrogen economy investment theme through an ETF introduced by Legal & General Investment Management last month. The L&G Hydrogen Economy UCITS ETF (HTWO LN) tracks the Solactive Hydrogen Economy Index and comes with an expense ratio of 0.49%. It currently houses $280m in assets.