Roundhill Investments has reduced the fee charged on its ETF providing thematic exposure to growth-oriented companies associated with the digital infrastructure sector.
Roundhill believes that the digital infrastructure theme is well-placed to prosper over the coming decades.
Effective immediately, the Roundhill IO Digital Infrastructure ETF (BYTE US) has seen its expense ratio lowered from 0.75% to 0.45%.
Roundhill defines digital infrastructure as the high-tech physical assets that power the internet by supporting the efficient storage and transmission of data.
These assets include fixed-line, high-speed data transmission technology and hardware (such as fiber optic cable), data centers, mobile towers, and other long-lived physical infrastructure assets.
Roundhill maintains that the digital infrastructure theme appears well-placed to prosper throughout the upcoming decades as the emergence of new digital technologies, the growing connectivity across Internet-of-Things devices, and the greater adoption of cloud computing, 5G, artificial intelligence, online gaming, social media, streaming platforms, and AR/VR are almost certainly likely to drive robust demand for digital infrastructure assets.
According to Roundhill, businesses focused on digital infrastructure assets are typically characterized by long-duration recurring cash flows, secular growth, inflation resilience, sound financial positions, and strategic competitive positions.
Despite the strong outlook, BYTE has struggled to garner interest from investors since debuting in November 2021 and currently houses less than $5 million in assets.
Methodology
The fund is linked to the IO Digital Infrastructure Index which was developed by IO Digital Index Partners, a newly formed indexing and research firm.
The index selects its constituents from a universe of developed and emerging market companies with market capitalizations above $250 million and average daily trading volumes greater than $1m.
Eligible companies must derive at least 50% of their revenues from digital infrastructure assets, while an index committee removes firms that rely on legacy technologies or are in highly competitive services industries.
IO Digital Index Partners then harnesses its proprietary research to assign each firm in the eligible universe with a ‘GVS’ score based on three fundamental factors: Growth (growth of gross revenue and profitability), Value (based on various price multiples), and Soundness (reflecting balance sheet strength and ESG profile).
The methodology then selects and weights 40 constituents using a smart beta approach that aims to maximize the index’s GVS score while accounting for various constraints including capping the weight of any stock at 7%, ensuring at least 65% of the index is allocated to US-listed companies, and capping the weight of developed non-US stocks and emerging market stocks at 35% and 15%, respectively.
The index is reconstituted and rebalanced on a semi-annual basis.