Alkali Fintech, a recently formed investment adviser focused on serving Generation Z, has introduced its debut ETF.
Alkali Fintech co-Founders Eitan Prins-Trachtenberg (l) and Julian Feder (r).
Listed on the Nasdaq Stock Market, The Generation Z ETF (ZGEN US) provides thematic exposure to companies aligned with the aspirations of Alkali Fintech’s target demographic.
Generation Z, colloquially known as ‘zoomers’, refers to people born from the mid-to-late 1990s to the early 2010s.
The fund has been brought to market in participation with asset manager and ETF white-label service provider Alpha Architect.
According to a Bank of America Research report, zoomers are primed to take over the economy within the next decade with a predicted income of $33 trillion surpassing that of millennials by 2031.
Alkali Fintech was co-founded by two zoomers – Julian Feder, 18, and Eitan Prins-Trachtenberg, 17 – who believe their ETF can motivate younger generations to start investing earlier in order to build future financial security.
Julian Feder, said: “In the past, people didn’t start investing until they were 30, 40, or older. Why can’t we start at 16? Imagine what my generation will look like in twenty years if we start investing now. Amazingly, the markets lack investments that are diversified and relatable to my generation. ZGEN fills this gap.”
Eitan Prins-Trachtenberg, added: “The launch of ZGEN shows that people of any age can be leaders in their space. With ZGEN, we hope to provide the resources, education, and confidence for the next generation of investors to achieve financial security.”
Investment approach
The ETF is actively managed but closely follows a rules-based methodology.
The fund’s investment universe consists of US-listed equities that had their initial public offering after 1997, a proxy for the beginning of Generation Z.
Alkali Fintech assigns each eligible company with a ‘Gen Z’ score based on its alignment with zoomers across four factors: utility, innovation, disruptiveness, and values.
Based on data derived from social media, news reporting, and public company information, the utility factor reflects whether a company’s dominant customer segment is Generation Z compared to other age cohorts and whether a company’s products or services are widely used amongst zoomers. Companies with the lowest utility scores making up roughly half of the eligible universe are eliminated.
The innovation factor rewards companies that have created successful, unique, and differentiated products, as well as firms that invest heavily into research and development.
The disruption factor rewards companies that are experiencing growth and growing market share by disrupting an existing industry or tapping into new or underserved markets.
Finally, the values factor reflects Alkali Fintech’s subjective analysis as to whether a company is morally aligned with environmental consciousness, human welfare, social welfare, and leadership diversity.
The 50 stocks with the highest Gen Z scores are typically selected; however, Alkali Fintech may exclude firms that they expect to experience financial, reputational, legal, or regulatory issues.
Constituents are weighted to reflect the strength of their Gen Z scores while capping any single stock at 5%.
The resulting portfolio targets a range of disruptive industries such as the metaverse, sustainable energy, digitalization, agricultural technology, blockchain, and democratized education. Its top ten holdings include Snap, Roblox, Coursera, Tesla, Shopify, Enphase, Duolingo, Square, Coinbase, and Unity.
The ETF comes with an expense ratio of 0.60%.