Amundi launches smart beta US technology ETF

Nov 30th, 2022 | By | Category: Equities

Amundi has launched a new ETF providing equally weighted exposure to technology and technology-enabled stocks listed in the US.

Amundi launches smart beta US technology ETF

The ETF provides equally weighted exposure to the largest non-financial stocks listed on Nasdaq.

The Amundi US Tech 100 Equal Weight UCITS ETF has been listed on Deutsche Börse Xetra in US dollars (WEBB GY) and euros (WEBA GY).

The fund is linked to the Solactive United States Technology 100 Equal Weight Index which consists of the largest 100 non-financial stocks listed on Nasdaq.

The index’s selection criteria are, therefore, similar to the Nasdaq 100, the world’s pre-eminent growth index.

Contrary to the market-cap-weighted Nasdaq 100, however, the Solactive United States Technology 100 Equal Weight Index equally weights its constituents on a quarterly basis.

Proponents of an equal-weight investment approach highlight how the strategy mitigates one of the most common criticisms of market-cap-weighted indices – the concentration risk imposed by the largest constituents.

The security-level concentration risk of the Nasdaq 100 is significant with the ten largest constituents accounting for just over half (50.4%) of the index’s total weight: Apple (13.1%), Microsoft (10.2%), Alphabet (6.7%), Amazon (5.4%), Tesla (3.2%), Nvidia (3.1%), Pepsi (2.4%), Costco Wholesale (2.2%), Meta Platforms (2.1%), and Broadcom (2.0%).

In contrast, the Solactive United States Technology 100 Equal Weight Index assigns each of its one hundred constituents a weight of just 1% at each rebalance.

As well as enhanced diversification at the security level, the equally weighted index delivers more balanced exposure across sectors with smaller allocations to the information technology sector (37.3% vs. 50.3% in the Nasdaq 100) and communications sector (10.8% vs. 15.2%), a similar allocation to the consumer discretionary sector (14.4% vs. 14.5%), and larger allocations to the healthcare sector (14.1% vs. 7.6%) and industrials sector (9.6% vs. 3.9%).

Despite diversification benefits, equal-weighted approaches may go through periods of relative underperformance, such as in momentum-driven markets, and when larger firms experience growth runs beyond the return on the broad market.

Year-to-date, however, the Solactive United States Technology 100 Equal Weight Index is outperforming due primarily to the brutal sell-off in technology stocks earlier in the year which disproportionately affected larger companies – the equal-weight index is down -24.0% so far this year compared to -28.7% for the Nasdaq 100.

Amundi’s latest ETF comes with an expense ratio of just 0.07%, notably lower than the market-cap-weighted Nasdaq 100 ETFs currently available in Europe.

AXA Investment Managers recently introduced the AXA IM Nasdaq 100 UCITS ETF (ANAU GY) which became the cheapest Nasdaq 100 ETF on the continent with an expense ratio of 0.14%, while the seasoned $7.0bn iShares Nasdaq 100 UCITS ETF (CNDX LN) and $5.5bn Invesco EQQQ Nasdaq 100 UCITS ETF (EQQQ LN) have expense ratios of 0.33% and 0.30%, respectively.

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