SS&C ALPS Advisors has launched a new thematic equity ETF providing smart beta exposure to companies expected to benefit from a rebound in global travel.
The ETF provides exposure to travel-related companies while favouring firms with quality and growth characteristics.
The ALPS Global Travel Beneficiaries ETF (JRNY US) has been listed on NYSE Arca with an expense ratio of 0.65%.
The fund is linked to the S-Network Global Travel Index which selects its constituents from a universe of developed and emerging market companies with market capitalizations above $100 million and average daily trading volumes greater than $1m.
The methodology screens for firms that derive at least 20% of their revenue from three segments of the global travel industry: airlines and airport services; hotels, casinos, and cruise lines; and booking and rental agencies.
A fourth segment – ancillary beneficiaries – captures companies that are not classified to traditional travel sectors but are still expected to experience a positive boost from growing global travel. These companies are identified using a natural language processing tool that searches for travel-related keywords in company statements.
Each company’s market capitalization is then adjusted to reflect the firm’s exposure to quality and growth factors. Generally, a firm’s market capitalization will be adjusted upwards if it has a higher average free-cash-flow-to-revenue ratio over the past five years, or higher expected earnings per share, compared to other firms.
Constituents are weighted by factor-adjusted market capitalization subject to an individual cap of 4.5%. Additionally, the index sets the same regional weights as the broad market S-Network Global 5500 Index for stocks listed in the US and Canada, Europe, Pacific (ex-Canada), and emerging markets.
The index is reconstituted and rebalanced quarterly.
As of 17 September, US stocks accounted for just under two-thirds (63%) of the total index weight followed by companies listed in France (9%), Japan (9%), and China (3%). Consumer discretionary stocks made up just under half (47%) of the index allocation with industrials (27%) and consumer staples (14%) also playing notable roles.
The largest positions were Marriott International (4.8%), American Express (4.7%), Hilton Worldwide (4.6%), Booking (4.6%), Walt Disney (4.5%), LVMH (4.4%), L’Oreal (4.4%), Estee Lauder (4.4%), and Airbnb (3.7%).
The fund will compete with several travel-related ETFs including the SonicShares Airlines, Hotels, Cruise Lines ETF (TRYP US) and the Defiance Hotel, Airline, and Cruise ETF (CRUZ US) both of which launched earlier this year. TRYP and CRUS come with expense ratios of 0.75% and 0.45%, respectively.
Investors exploring this theme may also wish to consider the $270m ETFMG Travel Tech ETF (AWAY US) which tracks the Prime Travel Technology Index, comprising technology-enabled companies operating within the global travel and tourism industry. The fund’s expense ratio is 0.75%