DWS has launched two new equity ETFs on Deutsche Boerse, providing exposure to companies closely related to the themes of future mobility and artificial intelligence (AI) & big data.
The funds’ indices utilize an AI-driven screening methodology to home in on the themes of future mobility and AI & big data.
The ETFs track global indices designed by Nasdaq and Yewno, a provider of AI solutions to the financial sector.
The indices first screen a global universe of stocks to remove those considered to have insufficient liquidity.
They then use a filtering methodology which itself uses AI processing to search for keywords within a company’s registered patents that are related to relevant sub-themes. The AI engine screens through millions of patents, selecting up to 100 companies for each index that are identified as having the most potential for future revenue generation.
These constituents are equally weighted within each index and rebalanced on a semi-annual basis.
“Our thematic ETFs are designed to focus in on up to 100 companies globally that are most likely to be the revenue winners of tomorrow, given the big societal shifts we’re seeing on the back of rapid technological advancement,” said Michael Mohr, Head of ETF Product Development, DWS. “Thanks to the advanced stock filtering methodology developed for the indices, we are able to provide the next generation of thematic products.”
Each fund is physically replicated, trades in US dollars, and comes with a total expense ratio (TER) of 0.35%.
Future mobility
The Xtrackers Future Mobility UCITS ETF (XMOV GY) tracks the Nasdaq Global Yewno Future Mobility Index which screens for firms poised to benefit from the sub-themes of autonomous vehicles, electric and hybrid vehicles, and electric and lithium batteries.
The index currently has 79 constituents. Over half (54.6%) of the index exposure is allocated to stocks listed in Japan, followed by the US (15.3%), Germany (9.1%), South Korea (8.8%) and Belgium (2.5%).
The largest sector exposures are to automobiles (20.2%), auto parts (15.4%), commodity chemicals (12.7%), and specialty chemicals (12.6%).
XMOV is the first ETF in Europe to provide targeted exposure to the broad future mobility theme; however, investors may gain exposure to the sub-theme of battery production through the L&G Battery Value-Chain UCITS ETF (BATT LN). BATT has approximately $30m in AUM but contains a relatively pricey TER of 0.75%.
AI & big data
DWS’s second launch is the Xtrackers Artificial Intelligence and Big Data UCITS ETF (XAIX GY) which tracks the Nasdaq Yewno Artificial Intelligence and Big Data Total Net Return Index. The index screens for firms poised to benefit from the sub-themes of deep learning, cloud computing, image recognition, speech recognition and chatbots, and natural language processing.
The index currently contains 94 constituents. Over two-thirds (70.0%) of the index exposure is allocated to stocks listed in the US, followed by Japan (7.5%), and Germany (4.0%).
The largest sector exposures are software (34.8%), computer hardware (10.4%), semiconductors (9.7%), and computer services (7.8%).
XAIX will compete against similar AI thematic funds launched at the end of 2018 by Amundi and WisdomTree. The Amundi Stoxx Global Artificial Intelligence UCITS ETF (GOAI FP) is the cheapest of the two with a TER of 0.35%. It also has accumulated over $145m in AUM since launch.
AI-oriented ETFs listed in Europe are also offered by LGIM, Lyxor, and HANetf/GinsGlobal Funds.