AAM launches transformative technologies ETF

Jul 13th, 2022 | By | Category: Equities

Colorado-based Advisors Asset Management has launched a new ETF providing exposure to companies developing technologies that are reshaping the global economy.

AAM launches transformative technologies ETF

The fund seeks to capture multiple technology-related megatrends.

The AAM Transformers ETF (TRFM US) has been listed on NYSE Arca with an expense ratio of 0.49%.

The fund is linked to the Pence Transformers Index which was created by California-based investment advisory firm Pence Capital Management and is independently calculated and maintained by S&P Dow Jones Indices.

Pence Capital combines economic analysis with the study of human behaviour to identify transformative themes and companies with competitive edges ahead of their peers.

The index selects its constituents from an initial universe comprising US-listed equities, including American Depositary Receipts, of companies with market capitalizations above $2 billion and average daily trading volumes greater than $2 million.

The methodology harnesses Pence Capital’s proprietary research to screen for firms that are classified within certain GICS sub-industries and that are considered to be involved in transformative technologies.

Examples of transformative technologies include autonomous and electric vehicles, digital marketing and retail channels, next-generation cellular data speeds and mobile devices, and carbon offset alternatives, among others.

From the universe of identified companies, the index includes all firms with consensus analyst ratings above 3.0 – where 5.0 represents the strongest buy recommendation and 1.0 the strongest sell recommendation.

The selected constituents are then divided into five categories which are assigned specific weights: category 1 (20% of the index weight) represents US-based companies with market caps over $100bn; category 2 (30%) represents US-based companies with market caps between $20bn and $100bn; category 3 (25%) represents US-based companies with market caps under $20bn; category 4 (15%) represents non-US-based companies with market caps over $30bn; and category 5 (10%) represents non-US-based companies with market caps between $2bn and $30bn.

Constituents are equally weighted within each category, and the index is rebalanced on a semi-annual basis.

As of the end of June, the index contained 166 constituents with nearly three-quarters (73.4%) of the total weight allocated to US-listed stocks with the next-largest country exposures being China (9.7%) and The Netherlands (2.5%).

More than half (57.5%) of the index’s allocation was dedicated to the information technology sector with consumer discretionary (18.3%), communication services (12.8%), and industrials (8.0%) stocks also playing notable roles.

The index’s top ten positions, each with a weight between 1.50% and 2.00%, included Tesla, Alphabet, Microsoft, Intuit, Apple, Salesforce, Mastercard, Amazon, Adobe, and Meta Platforms.

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