Defiance launches thematic ETF on food technology

Nov 15th, 2019 | By | Category: Equities

Defiance ETFs, a provider of thematic ETFs targeting disruptive trends, has launched a new fund providing exposure to firms that are leaders in food-related technology.

Paul Dellaquila, President of Defiance ETFs

Paul Dellaquila, President of Defiance ETFs.

The Defiance Next Gen Food and Agriculture ETF (DIET US) has listed on NYSE Arca and comes with an expense ratio of 0.30%.

The fund covers a range of companies that are changing the way food is produced, farmed, and enhanced such as those offering alternative plant-based sources of meat, seed modification, sustainable farming, and irrigation technology.

According to Defiance, the factors supporting investment in food technology companies include an expanding world population combined with the need for new farming methods due to climate change.

In addition, with an increasing number of people identifying as vegan or vegetarian, an opportunity has arisen for firms that specifically cater to the health, ethical, and environmental concerns of these consumers.

Paul Dellaquila, President of Defiance ETFs, commented, “One of the most important challenges facing the world right now is finding ways to massively increase global food supply in a way that also manages environmental impacts and meets the needs of an increasingly health-conscious consumer.”

Methodology

The fund is linked to the BlueStar Food and Agriculture Sustainability Index which selects its constituents from a universe of both developed and emerging market stocks globally. A company must have a market capitalization of at least $250 million to be eligible for selection, although the threshold is higher for certain types of firms.

The index consists of securities that derive at least 50% of their total revenue from business activities linked to food and agriculture sustainability. It is broken down into four groups of companies with each group assigned a fixed weight as of each semi-annual reconstitution and rebalancing.

Group 1 is assigned a 30% weight and consists of companies that are focused on irrigation systems, plant seed modification, vegan or plant-based branded foods, water meters, sustainable protein production, fertilizers, or pesticides.

Group 2 is assigned a 50% weight and consists of companies that are focused on flavours and fragrances, baby food, alternative sweeteners, or agricultural chemicals.

Group 3 is assigned a 10% weight and consists of companies that are focused on agriculture services, farm equipment and machines, or diagnostic equipment used for food production and safety.

Group 4 is also assigned a 10% weight and consists of companies that are focused on livestock feed and veterinary equipment, or branded foods.

Stocks are weighted by market capitalization within each group subject to a minimum of 0.5%. The weight of any stock in groups 1 or 2 is capped at 5%, while the weight of any stock in groups 3 or 4 is capped at 3%.

The fund joins a further three ETFs offered by Defiance focusing on next-generation themes, namely video gaming & eSports, quantum computers, and 5G technology. The firm’s largest fund is the Defiance Next Gen Connectivity ETF (FIVG US) which houses $130m AUM.

According to filings with the SEC, Defiance has two more thematic ETFs in the pipeline, targeting Medical Innovation and Junior Biotech companies.

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