DWS launches thematic ETF on critical technologies

Nov 20th, 2023 | By | Category: Equities

DWS has introduced a new thematic equity ETF targeting companies developing key technologies that support the interests of the US and its allies.

Arne Noack, Head of Systematic Investment Solutions, Americas at DWS

Arne Noack, Head of Systematic Investment Strategies, Americas, at DWS.

The Xtrackers US National Critical Technologies ETF (CRTC US) has been listed on NYSE Arca with an expense ratio of 0.35%.

The fund offers an unexplored investment approach, combining industry-level screening with a geostrategic risk rating score that measures a potential constituent’s entanglement in countries deemed risky by the US government.

The result is a diversified portfolio that aligns with the US’s modernization priorities while minimizing geopolitical risk from sanctions, trade, and conflict.

Arne Noack, Head of Systematic Investment Strategies, Americas, at DWS, commented: “Over the past few decades, advancements in technology and infrastructure have become a key resource and determining factor for current and future economic competitiveness. Our new ETF will provide investors with exposure to sectors and companies aligned to technologies of strategic importance, as well as fortify their investments against certain geostrategic interdependencies.”

Dirk Goergen, CEO of DWS Americas, added: “In our ongoing build-out of the Xtrackers ETF offering in the US market, we continue to focus on key strategic themes in the current economic environment as well as the foreseeable future. Complementing our existing offerings in cybersecurity, semiconductors, and US green infrastructure, our newest launch is an innovative way for investors to gain efficient exposure to technologies deemed critical to the national security of the United States.”

Methodology

The ETF is linked to the Solactive Whitney US Critical Technologies Index which selects its constituents from an initial universe of large and mid-cap stocks listed in developed market countries.

The methodology utilizes a granular industry classification system to screen for companies actively involved in any of the 14 critical technology areas identified by the Office of the Undersecretary of Defense Research & Engineering: biotechnology, quantum science, future-generation wireless technology, advanced materials, trusted AI & autonomy, integrated network systems, microelectronics, space technology, renewable energy, advanced computing, human-machine interfaces, directed energy weapons, hypersonics, and integrated sensing & cybersecurity.

Potential constituents identified through the above screening step must also attain a satisfactory risk rating according to an analysis conducted by global economic research house J.H. Whitney. The firm’s proprietary model considers a diverse range of risk factors like economic sanctions, national industrial and regulatory actions, and strategic economic competitions initiated by the US and its adversaries.

Constituents chosen for the index are weighted by float-adjusted market capitalization subject to a single security cap of 5%. Reconstitution and rebalancing occur on a quarterly basis.

As of the end of October, the index contained 242 constituents with the vast majority of the total weight allocated to companies listed in the US (87.0%) followed by Canada (3.4%) and the UK (3.1%).

Notable positions included Nvidia, Amazon, Microsoft, and Alphabet, each holding a weight of approximately 5%, followed by Exxon (3.2%), Adobe (2.1%), Chevron (2.1%), and AbbVie (1.9%).

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