DWS has introduced its first thematic equity ETFs in the US with the launch of three funds targeting US companies developing so-called ‘green’ infrastructure as well as firms within the global semiconductor and cybersecurity sectors.
Arne Noack, Head of Systematic Investment Solutions, Americas, at DWS.
Listed on Nasdaq, the three funds are the Xtrackers US Green Infrastructure Select Equity ETF (UPGR US), the Xtrackers Semiconductor Select Equity ETF (CHPS US), and the Xtrackers Cybersecurity Select Equity ETF (PSWD US).
UPGR, CHPS, and PSWD come with expense ratios of 0.35%, 0.15%, and 0.20%, respectively.
According to Amanda Rebello, Head of Xtrackers Sales, US Onshore, at DWS, the green infrastructure, semiconductor, and cybersecurity sectors all possess favourable outlooks that are being driven by long-term secular changes. The themes are poised to benefit from enhanced government spending, regulatory backing, and the surging demand for cutting-edge global technologies and sustainable solutions.
On green infrastructure, DWS notes that the signing of the Inflation Reduction Act and Infrastructure Investment and Jobs Act confirmed the United States’ commitment to revamping its infrastructure in a sustainable way. Implementation of these laws is expected to provide substantial short- and long-term investment opportunities as projects are developed.
The semiconductor industry, meanwhile, is expected to continue benefitting from several long-term tailwinds including the global 5G rollout, greater interconnectivity, and smarter consumer technology.
Finally, DWS highlights the growing necessity for effective cybersecurity solutions to fight cybercrime which is increasing as global activity continues to shift to digital. Companies involved in creating cybersecurity solutions provide investors with the opportunity to capitalize on the innovation and growth prospects of the industry.
Arne Noack, Head of Systematic Investment Solutions, Americas, at DWS, commented: “We are delighted to offer investors the opportunity to access three thematic investment trends through efficient index-tracked solutions. The themes that underpin UPGR, PSWD, and CHPS, we believe, hold immense potential for impact on the economy in both the near and long term. It has long been our mission to offer investors innovative and diverse ETF solutions that not only enhance their core portfolio holdings but provide exposure to different segments of the global economy.”
Investment approach
UPGR, CHPS, and PSWD are each linked to indices developed by Solactive which exclude violators of UN Global Compact principles, companies with high ESG-related risks, and firms with business activities linked to controversial weapons, tobacco, thermal coal, oil & gas, and civilian firearms.
The Solactive United States Green Infrastructure ESG Screened Index selects its constituents from an initial universe of US-listed stocks with market capitalizations above $100 million and average daily trading volumes greater than $1m.
The methodology screens for the 50 largest stocks that operate within certain green infrastructure industries according to FactSet’s Revere Business Industry Classification System (RBICS). Eligible industries are categorized within green mobility, green fuel, green energy, green wholesale power, environmental services, and pollution control categories. Each constituent in the index is equally weighted at each quarterly rebalance.
The Solactive Semiconductor ESG Screened Index selects the 50 largest semiconductor companies from an initial universe of global stocks, excluding those from China, with market capitalizations above $100m and average daily trading volumes greater than $1m. Constituents are weighted by float-adjusted market capitalization subject to a single stock cap of 4.5%.
The Solactive Cyber Security ESG Screened Index selects its constituents from the same initial universe as the semiconductor index. The index targets 50 constituents, choosing the largest firms within certain cybersecurity-related industries according to RBICS. The methodology first chooses ‘pure-play’ firms (those with greater than 50% revenue exposure) before moving on to ‘diversified’ companies to meet the target constituent count. Constituents are weighted by float-adjusted market capitalization subject to a single stock cap of 4.5% for pure-play firms and 1% for diversified firms.