New York-based exchange-traded fund provider Global X Funds has unveiled a trio of thematic ETFs focused on three important technological mega-trends: FinTech, Robotics & Artificial Intelligence, and the Internet of Things.
Jay Jacobs, Director of Research at Global X.
“FinTech, Robotics & Artificial Intelligence, and the Internet of Things are among the most significant emerging technological trends in the world as they are set to disrupt a broad range of industries and change how we interact with ordinary things like banks, cars, and even refrigerators,” commented Jay Jacobs, Director of Research at Global X. “Our aim with launching these funds is to provide investors with tools to efficiently gain exposure to the companies that are well-positioned to grow from these technological revolutions.”
Financial Technology
The Global X FinTech Thematic ETF (Nasdaq: FINX) tracks the Indxx Global FinTech Thematic Index, providing exposure to disruptive technology companies in the financial services space.
The index’s methodology initially conducts size and liquidity screens, excluding firms with market capitalizations below $100m and average daily turnover for the past six months below $2m. It subsequently examines each eligible company’s business operations to determine whether a significant proportion of revenues are derived from any of the following FinTech industries: peer-to-peer marketplace lending, mobile payments, crowdfunding, blockchain and alternative currencies, personal finance software, automated wealth management and trading, and enterprise solutions.
The top companies (capped at 100 but no fewer than 20) form the final portfolio which is weighted by free-float market capitalization with a single security cap of 6.0%. The index is rebalanced annually on the last trading day of June.
As examples of the growth potential of the sector, Global X notes that current growth rates indicate that crowd funding platforms will overtake venture capital as a means of raising money before the end of 2016, and mobile payment technology will cater to over $1tn in annual transactions by 2020.
As of 12 September 2016, the fund’s index had 29 constituents, the largest of which were First Data (6.1%), SS&C Technologies (5.8%), Wirecard (5.6%), Fidelity National Information (5.5%) and Paypal Holdings (5.2%). The largest country allocations were the US (67.6%), Germany (7.8%), Switzerland (7.2%) and Australia (5.8%).
As with many technology-based exposures, the index has shown heightened volatility compared to the broad market; since its base date in June 2015 the index has displayed a beta of 1.12 versus the MSCI ACWI, an annualized return of 9.6% and a standard deviation of 16.4%.
Source: Indxx.
The ETF, which has a total expense ratio (TER) of 0.68%, will likely compete with the PureFunds Solactive FinTech ETF (Nasdaq: FINQ), which launched on 31 August 2016. The PureFunds ETF tracks the Solactive FinTech Index, composed of 31 global holdings, and has a TER of 0.68%.
Robotics & Artificial Intelligence
The Global X Robotics & Artificial Intelligence Thematic ETF (Nasdaq: BOTZ) tracks the Indxx Global Robotics & Artificial Intelligence Thematic Index, tracking the performance of companies listed in developed markets that are expected to benefit from the increased adoption and utilization of robotics and Artificial Intelligence.
The index follows similar initial screens for size and liquidity, before selecting the top pure-play companies (capped at 100 but no fewer than 20) involved in the robotics & AI space: industrial robotics and automation, unmanned vehicles and drones, non-industrial robotics and artificial intelligence. Constituents are weighted by free-float market capitalization and a single issuer cap of 8% is applied. The index is rebalanced annually on the last day of June.
Global X notes that by 2020, the robotics industry is expected to grow to a total of $83bn, and the AI market is expected to grow from $420m in 2014 to over $5bn by 2020.
As of 12 September 2016 the index had 28 constituents and the largest country allocations are Japan (46.1%), the US (20.4%), Switzerland (10.5%), the UK (5.7%) and the Netherlands (4.7%). The largest holdings are ABB (8.1%), SMC (7.8%), Mitsubishi Electric (7.6%), Keyence (7.5%) and Intuitive Surgical (7.4%).
The index has shown a beta of 0.91 versus the MSCI ACWI since its base date in June 2010. It has returned 13.8% per annum with a standard deviation of 14.1% over this period.
Source: Indxx.
The ETF has a TER of 0.68% and will likely come up against the ROBO Global Robotics & Automation ETF (Nasdaq: ROBO) which launched in October 2013 and has $97m in assets under management. This fund has a TER of 0.95%.
For European based investors, there are a couple of ETFs from iShares and ETF Securities offering exposure to the robotics theme: the recently launched iShares Automation & Robotics UCITS ETF (LON: RBOT) which tracks the iStoxx FactSet Automation & Robotics Index and has a TER of 0.40%; and the $79m ROBO Global Robotics & Automation GO UCITS ETF (LON: ROBO) which tracks the ROBO Global Robotics & Automation UCITS Index. The ROBO Global Robotics & Automation GO UCITS ETF recently lowered its TER from 0.95% to 0.80% after changing to a physically backed ETF structure.
Internet of things
The Global X Internet of Things Thematic ETF (Nasdaq: SNSR) tracks the Indxx Global Internet of Things Thematic Index, offering exposure to companies that stand to potentially benefit from the broader adoption of the ‘Internet of Things’, including the development and manufacturing of semiconductors and sensors, integrated products and solutions, and applications serving smart grids, smart homes, connected cars, and the industrial internet.
After applying size and liquidity screens, the index selects the top pure play companies involved in the following industries most closely associated with the theme: semiconductors and sensors, networking infrastructure/software, equipment, vehicle and infrastructure technology, and consumer internet of things technology. The final constituents (up to 100 but no fewer than 20) are weighted by free-float market capitalisation, with a single security cap of 6%.
According to a McKinsey report, the ecosystem of devices and objects that are wireless connected is expected to total over 50bn by 2020, with an estimated economic impact of $3.9-$11.1tn by 2025.
As of 12 September 2016, the index had 43 constituents, the largest being Dexcom (6.4%), Stmicroelectronics (6.2%), Garmin (6.1%), Sensata Technologies (6.0%) and Skyworks Solutions (5.9%). The largest country exposures were the US (52.4%), the Netherlands (19.0%), Switzerland (8.3%), Taiwan (5.1%) and France (4.2%).
The index has shown a beta of 1.25 versus the MSCI ACWI since its base date in June 2010. The index return has been 15.5% per annum with a standard deviation of 16.9% over this period.
Source: Indxx.
The ETF has a TER of 0.68%.
Global X launched its first thematic ETFs in 2010 and has since grown the suite to fifteen funds and approximately $1bn in assets under management as of 6 September 2016. Other thematic technology ETFs in the range include the Global X Lithium ETF (NYSE: LIT) and the Global X Social Media Index ETF (Nasdaq: SOCL).