ALPS launches disruptive technologies ETF

Jan 2nd, 2018 | By | Category: Equities

US-based ETF issuer/distributor ALPS Advisors has teamed up with NY indexing boutique Indxx to launch the ALPS Disruptive Technologies ETF (DTEC US) on Cboe ETF Marketplace.

Mike Akins, director of ETFs at ALPS Advisors.

Mike Akins, director of ETFs at ALPS Advisors.

The ETF, which is linked to the newly launched Indxx Disruptive Technologies Index, tracks companies that enter traditional markets with new digital forms of production and distribution, and are likely, according to Indxx, to disrupt an existing market and value network, displace established market-leading firms, products and alliances, and increasingly gain market share.

Indxx has identified the following ten broad sub-themes to be most relevant to the disruptive technologies theme: 3D printing, clean energy and smart grid, cloud computing, cybersecurity, data & analytics, fintech, healthcare innovation, internet of things, mobile payments, and robotics and artificial intelligence.

Companies that generate more than 50% of their revenue from these sub-themes are eligible for inclusion in the index, with the ten largest by market cap from each sub-theme selected to form the final index. An equal-weighting methodology at both the stock and theme level allows for participation in all disruptive technology segments of the market while lowering idiosyncratic risk in the portfolio.

“With this launch, Indxx is excited to continue to drive innovation in the thematic indexing space,” said Rahul Sen Sharma, partner at Indxx. “Over the last few years, we have established ourselves as a market leader when it comes to thematic indices by combining top-quality research capabilities with cutting-edge thought leadership. We are delighted to add to our growing list of indices in this space through our new relationship with ALPS.”

“ALPS is proud to be launching one of the first ETFs that offers investors exposure to so many investment themes within a single product”, added Mike Akins, director of ETFs at ALPS. “We also look forward to our new index provider relationship with Indxx. As an innovative firm and leaders in the thematic space, we believe the index effectively targets the immense potential offered by disruptive technologies over the coming years and decades.”

The largest sector exposure, perhaps unsurprisingly, is information technology with 58% of the total index weight, followed by industrials (17.9%), healthcare (11.7%) and financials (6.1%). The index provides exposure across the market cap spectrum with large-cap companies accounting for half of the total weight, and mid- and small-caps making up approximately 38% and 12% respectively.

DTEC charges annual fees of 0.50%.

The fund will likely compete with the iShares Exponential Technologies ETF (XT US) which trades on Nasdaq Exchange and tracks the Morningstar Exponential Technologies Index. According to BlackRock, XT provides exposure to global companies with significant exposure to key areas of technological transformation. Compared to DTEC, XT has a larger exposure to the healthcare sector, which accounts for a third of the total weight, while information technology comprises a third of the index weight. XT has $1.5 billion in assets under management and a total expense ratio (TER) of 0.47%.

In Europe, there is not yet an ETF providing comparable diversified exposure across multiple investment themes. However, European investors are able to fashion together a similar exposure by blending several single-theme ETFs, such as the ETFS ROBO Global Robotics and Automation GO UCITS ETF (ROBO LN), the ETFS ISE Cyber Security GO UCITS ETF (ISPY LN), the Source NASDAQ Biotech UCITS ETF (SBIO LN), the iShares Healthcare Innovation UCITS ETF (HEAL LN) and the Source KBW NASDAQ Fintech UCITS ETF (FTEK LN).

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