Global X has unveiled its first European domiciled UCITS ETFs – a pair of thematic technology-focused strategies that transcend traditional sector, industry, and geographic classifications.
New York-headquartered Global X ETFs has debuted in Europe with two thematic ETFs targeting the video games & esports and telemedicine & digital health industries.
The New York-based firm, which announced its entrance to the European market earlier this month, has debuted with the Global X Video Games & Esports UCITS ETF and the Global X Telemedicine & Digital Health UCITS ETF.
The funds have listed on the London Stock Exchange and are linked to indices provided by Solactive.
Video Games & Esports
Tracking the Solactive Video Games & Esports v2 Index, the Global X Video Games & Esports UCITS ETF provides investors with targeted exposure to the video games and esports industries – entertainment genres that have seen huge growth in 2020 owing to pandemic-related stay-at-home orders.
The index includes companies involved in the development or publishing of video games, companies involved in the streaming and distribution of video gaming and esports content, and companies involved in the manufacture of hardware used in video games and esports.
Japan, United States, China and South Korea are the largest country exposures which together constitute over 80% of the index. Significant positions include Bilibili, Nexon, Take-Two Interactive, Nintendo, Sea, Capcom, Embracer, Konami, Electronic Arts, and Activision Blizzard.
The fund has a total expense ratio of 0.50% and is available in USD (HERU LN) and GBP (HERG LN) share classes. Income is distributed semi-annually.
Global X offers a US-domiciled version of the strategy in the form of the Global X Video Games & Esports ETF (HERO US). Launched in October 2019, this Nasdaq-listed fund has grown to $545m in assets.
Telemedicine & Digital Health
The Global X Telemedicine & Digital Health UCITS ETF tracks the Solactive Telemedicine & Digital Health Index and offers investors access to companies driving advancements in the telemedicine and digital health theme.
The Covid-19 pandemic appears to have accelerated the use of digital technologies in health care, with Global X noting that some health care providers are reporting increases in the deployment and uptake of remote telehealth appointments by as much as 175x in 2020.
The underlying index includes companies involved in telemedicine, health care analytics, connected health care devices, and administrative digitalisation. Despite the global mandate, the index is heavily tilted to US stocks, which make up in excess of 80% of the index. Significant positions include M3, Nuance Communications, Neogenomics, Alibaba Health, Agilent Technologies, Illumina, Guardant Health, Cerner, Omnicell, and iRhythm Technologies.
Global X offers a version of this strategy in the US, too, namely the Global X Telemedicine & Digital Health ETF (EDOC US), listed on Nasdaq. Only introduced in July this year, the fund has raced to $524m in assets, making it one of the best-performing ETF launches of the year as measured by asset gathering.
The fund has a total expense ratio of 0.68% and is available in USD (EDOC LN) and GBP (EDOG LN) share classes. Income is distributed semi-annually.
Index design
The two indices follow almost identical construction methodologies.
Constituents are selected using Solactive’s proprietary ARTIS natural language processing algorithm which screens publicly available information to identify companies that have or are expected to have significant exposure to the particular theme, i.e. video games and esports or telemedicine and digital health.
The algorithm then ranks the companies it identifies according to the frequency with which the company is referenced in relation to specific keywords, with the top-ranking companies selected for inclusion, subject to various economic pure-play and tradability criteria.
To be eligible, companies must generate at least 50% of their revenues from relevant business operations pertaining to the theme. They must also be listed in a developed market, have a market capitalization of at least $200 million, and have posted average daily value traded in the last six months of at least $2m.
The indices each comprise a maximum of 40 constituents with constituents assigned weights according to their free-float market capitalization, subject to a maximum weight of 4.5% for the video games and esports index and 4% for the telemedicine and digital health index, and a minimum weight of 0.30%. Excess weight that results from the cap constraints is redistributed proportionally.
‘Powerful themes’
Rob Oliver, Head of Business Development in Europe at Global X, commented: “We believe investors are increasingly seeking exposures beyond broad-market indices to achieve their unique financial goals. Global X has spent the last decade developing a comprehensive suite of thematic strategies targeting among the highest potential growth areas of the market. We are thrilled to broaden access in Europe to Global X’s research-driven approach to thematic investing for the first time.”
Morgane Delledonne, Global X’s Director of Research in Europe, added: “Across the global economy, digitalisation is accelerating as businesses, consumers, and governments are increasingly embracing these disruptive technologies to enhance production, quality of life and offer societal benefits.
“In health care, telemedicine & digital health are revolutionising the access to and quality of patient care, while simultaneously reducing costs. On the consumer side, video games & esports are providing immersive, mobile, and social entertainment to billions of gamers around the world, dramatically changing the way we spend our leisure time. We expect these powerful themes to continue to experience long-term growth as they further disrupt traditional economic sectors.”
The funds have each been seeded with a little over $3m in assets.
Global X is a subsidiary of Asian investment house, Mirae Asset Global Investments.