DWS has launched a new global equity ETF in the US providing exposure to companies closely related to the theme of artificial intelligence (AI) and big data.
Arne Noack, Regional Investment Head Xtrackers, Americas, DWS.
The Xtrackers Artificial Intelligence and Big Data ETF (XAIX US) has been listed on Nasdaq with an expense ratio of 0.35%.
The fund tracks the Nasdaq Global Artificial Intelligence and Big Data Index which is designed to provide investors with broad access to both current and emerging leaders in AI and big data technologies.
The index first screens an initial universe of developed and emerging market stocks to remove those considered to have insufficient liquidity.
It then uses a filtering methodology that itself employs AI processing to search for keywords within a company’s registered patents that are related to relevant AI & Big Data sub-themes. Specifically, the index screens for firms poised to benefit from advancements in deep learning, cloud computing, image recognition, speech recognition and chatbots, and natural language processing.
The AI engine screens through millions of patents, selecting companies that are identified as being the most innovative within these sub-themes.
Constituents that are selected for the index are market capitalization-weighted with a 4.5% cap for each stock at each semi-annual rebalancing.
The resulting index allocates approximately 70% of its exposure to US companies, with additional significant exposures of around 8% to Japan, 6% to the United Kingdom, and 4% to China. Industry-wise, it focuses heavily on Information Technology (about 60%), Consumer Discretionary (15%), and Health Care (10%). The largest constituents include Alphabet (5%), Microsoft (5%), and Amazon.com (4%).
The new fund enhances DWS’s current thematic ETF portfolio, which already includes funds focused on critical technologies, green infrastructure, semiconductors, cybersecurity, and natural resources.
Arne Noack, Regional Investment Head Xtrackers, Americas, DWS, commented: “With this fund, DWS is providing investors with exposure to AI producers and innovators, instead of the broad universe of AI beneficiaries. Many companies are starting to highlight the application of AI in their business models; however, very few are AI innovators. The unique selection process of this index allows DWS and Nasdaq to identify who is truly an innovator systematically.”
Amanda Rebello, Head of Xtrackers Sales, US Onshore, added: “The Xtrackers Artificial Intelligence and Big Data ETF can help with risk management by providing a diversified exposure to this theme. By tracking an index that caps individual stocks weights, this may help minimize esoteric, single-stock exposure in a portfolio, thereby decreasing the chance of experiencing an extreme drawdown attributable to just one name’s total return.”