New York-based ETF provider Global X has announced the launch of the Global X E-commerce ETF (EBIZ US), providing exposure to companies globally that are active in E-commerce.
E-retail revenues are expected to rise to $4.88 trillion globally by 2021.
The fund is linked to the Solactive E-commerce Index and has been listed on the Nasdaq Exchange.
The index consists of developed and emerging market firms that operate E-commerce platforms; provide E-commerce software, analytics or services; or sell their goods and services primarily through online channels.
Constituents must derive at least 50% of their revenue from E-commerce operations to be eligible for inclusion and have a market capitalization in excess of $200 million and average daily trading volume of more than $2m.
The index then utilizes Solactive’s proprietary Natural Language Processing engine called ARTIS (Algorithmic Theme Identification System) which identifies thematic exposures in companies using unconventional data sources. ARTIS analyzes large volumes of company reports, financial news, as well as business descriptions and reveals relationships between keywords that describe a theme and companies that are active in this very field.
The algorithm ranks the companies according to the frequency with which the company is referenced in relation to the specific keywords. The 40 highest ranked securities form the final index and are weighted by free float market capitalization subject to an individual floor and cap of 0.3% and 4.0% respectively.
Roughly half (48.7%) of the index is currently allocated to stocks listed in the US and a further quarter (24.2%) to Chinese firms. Japan and the UK are the next largest country contributors with weights of 8.7% and 8.0% respectively. Internet retailers – firms such as Etsy, Amazon and ASOS – dominate the index with a collective weight of 71.0%.
E-commerce boom
According to Global X, E-commerce is experiencing a boom. The provider points to research by eMarketer that predicts that the number of online shoppers is expected to grow to 3.1 billion people globally by 2021, lifting E-retail revenues to $4.88 trillion. Current figures show a user base of 2.7bn people and revenues of $2.3tn in 2017.
Jay Jacobs, Senior Vice President and Head of Research and Strategy at Global X Funds, said, “While e-commerce may seem pervasive, we believe we are still in just the early innings of experiencing its disruptive potential. Extending to additional segments of the US retail market and growing adoption overseas should make E-commerce even more accessible and dominant over brick and mortar business models.”
He added, “We believe that particularly as Millennial and Generation Z buyers become more of a driving force in the economy and new technologies facilitate even more seamless shopping, purchasing, and delivery, that E-commerce will represent an increasingly significant share of the multi-trillion dollar global retail industry.”
Timo Pfeiffer, Head of Research at Solactive, commented: “Undoubtedly, it is safe to say that E-commerce will further define our consumption habits, which are focusing largely on the immediate availability of goods. Additionally, future E-commerce revenue will be driven by more sophisticated personalized online ad-strategies, displaying more relevant products according to our online behaviour.”
The fund comes with an expense ratio of 0.68%.