ETF Managers Group (ETFMG) has unveiled the world’s first ETF designed to give pure-play exposure to real estate technology companies.
Sam Masucci, CEO and Founder of ETFMG
Listed on NYSE Arca, the ETFMG Real Estate Tech ETF (HHH US) provides targeted access to global technology companies that are digitally transforming the real estate industry to optimize the way people research, rent, buy, sell, insure and manage property.
“The real estate industry is on fire, and property technology is adding the fuel,” said Sam Masucci, CEO and Founder of ETFMG. “As the largest asset class in the world, the intersection of real estate and technology is only natural. HHH is the first of its kind to provide global exposure to the companies bringing disruptive technology to real estate.”
The fund is linked to the Prime Real Estate Technology Index, an index created by Prime Indexes.
Kris Monaco, Managing Partner and Co-Founder of Prime Indexes, said: “The relentless advancement of technology has transformed almost every major industry, but the multi-trillion-dollar real estate industry has been virtually untouched, until now. The Prime Real Estate Technology Index captures this profound change, and we are excited once again to partner with ETFMG as it launches another first-to-market investment product.”
To be eligible for inclusion in the Prime Real Estate Technology Index a company must first derive more than 50% of its revenue from a real estate technology activity. For index construction purposes, this is defined as property-related services delivered via the internet or internet-connected devices. Such services include property listing, advertising and marketing; real estate brokerage; property insurance and loan services; home improvement or repair services intermediation, and the provision of software, data, or other technology to real estate companies.
Companies meeting this definition are identified via a range of sources including business activity descriptions in regulatory filings, investor presentations, and third-party industry research.
As well as fulfilling business activity and revenue criteria, companies must also meet various capacity and liquidity requirements. These include a market capitalization of $250 million or greater for initial entry and the maintenance of a market cap in excess of $125m to remain in it. Securities must also have an average daily value traded of $500,000 or greater for initial index entry ($250,000 for existing constituents), and must not be listed on an exchange in a country that employs restrictions on foreign capital investment.
The companies that meet these criteria constitute the index. Individual weightings are assigned according to a modified capitalization weighting methodology which allocates a 5% weight to the eight largest eligible constituents with the remaining eligible constituents weighted based on their market capitalization, subject to a 4% cap per security.
As of October 20, 2021, almost two-thirds of the index was allocated to stocks listed in the United States (64.9%), followed by China (9.0%), Australia (8.0%), Germany (7.0%), the United Kingdom (4.0%) and Canada (3.5%). Stocks from Italy, Sweden and Japan rounded out the portfolio.
Significant positions included KE Holdings (Beike) (6.0%), Opendoor Technologies (5.7%), CoStar Group (5.2%), Rocket Companies (5.1%), Rea Group (5.0%), Zillow Group (4.8%), Airbnb (4.7%), Black Knight (4.6%), eXp World Holdings (4.6%), and Ming Yuan Cloud (4.0%).
The fund has been seeded with $2.5m and comes with an expense ratio of 0.75%.