First Trust has unveiled two new thematic ETFs in Europe providing access to global trends in aerospace & defence technologies, as well as the semiconductor supply chain.
Rupert Haddon, Managing Director at First Trust Global Portfolios.
These funds offer investors targeted exposure to two pivotal areas of the modern economy: the increasing reliance on aerospace & defence technologies amidst heightened geopolitical tensions and the indispensable role of semiconductors in advancing technological innovation.
Aerospace & Defence
The First Trust Indxx Global Aerospace & Defence UCITS ETF has been listed on the London Stock Exchange in US dollars (MISL LN) and pound sterling (ICBM LN) with an expense ratio of 0.65%.
The fund tracks the Indxx Global Advanced Aerospace & Defence Index, which consists of companies listed in developed and emerging markets with market capitalizations exceeding $500 million and average daily trading volumes above $2 million.
The index is constructed by identifying companies that derive at least 50% of their revenues from one or more aerospace & defence sub-themes. These include hypersonic technology, directed energy, space technologies, unmanned aerial vehicles, advanced air mobility, autonomous vehicles, cybersecurity, C5ISR systems (Command, Control, Communications, Computers, Combat Systems, Intelligence, Surveillance, and Reconnaissance), and traditional aircraft manufacturing.
The final index comprises up to 50 of the largest eligible stocks, weighted by market capitalization, with a 4.5% cap on any single security and a 60% aggregate cap on US-listed stocks.
The index is reconstituted semi-annually and rebalanced quarterly.
Rahul Sen Sharma, President and Co-CEO at Indxx, commented: “The significant increase in geopolitical tensions highlighted by the Russia-Ukraine war and the Israel-Palestine conflict has led to a surge in military spending globally. In 2023, global defence expenditures reached approximately $2.44 trillion, with the US, China, Russia, India, and Saudi Arabia collectively accounting for nearly 61% of this spending. Fuelled by this global military expenditure, the demand for advanced defence technologies and capabilities has also increased. Our Global Advanced Aerospace & Defence Index is designed to provide targeted exposure to the top companies in this sector, enabling investors to capitalise on this trend.”
Rupert Haddon, Managing Director at First Trust Global Portfolios, added: “We are delighted to bring the First Trust Indxx Global Aerospace & Defence UCITS ETF to the market, giving investors the chance to tap into this sadly pivotal global theme through a cost-effective, highly liquid UCITS investment vehicle.”
Semiconductor Supply Chain
The First Trust Bloomberg Global Semiconductor Supply Chain UCITS ETF has also been listed on the London Stock Exchange in US dollars (CHPS LN) and pound sterling (FCHP LN), as well as on Xetra in euros (FCHP GY). It offers a slightly lower expense ratio of 0.60%.
The fund tracks the Bloomberg Global Semiconductor Supply Chain Select Index, which captures exposure to companies integral to the semiconductor manufacturing value chain and semiconductor device markets.
The index methodology begins with a universe of developed and emerging market-listed companies with market capitalizations greater than $500 million and average daily trading volumes above $3 million.
Bloomberg Intelligence screens the universe for companies with significant exposure to the semiconductor industry, ultimately selecting the top 50 eligible securities by free-float market capitalization.
The index allocates 70% of its weight to semiconductor manufacturers and supply chain participants, while 30% focuses on device companies with exposure to innovative end markets.
Constituents within each segment are weighted by float-adjusted market capitalization, subject to a 10% cap on each of the three largest positions and a 4% cap on all other stocks. The index is reconstituted and rebalanced quarterly.
Allison Stone, Head of Multi-Asset Product at Bloomberg Index Services, stated: “Bloomberg Indices has prioritised the growth of our thematic equities offering and we’re honoured that First Trust has selected another of our indices for their expanding ETF family for the European marketplace. The Bloomberg Global Semiconductors Supply Chain Select Index provides a foundation for CHPS to capture a unique view into the semiconductor sector.”
Rupert Haddon underscored the significance of the ETF: “Semiconductor chips form the bedrock of modern technology, powering nearly every aspect of our daily lives. Beyond the chips themselves, the importance lies in the intricate and highly specialised global supply chain behind them. Disruptions to this chain can ripple across industries with profound consequences. Today, governments and corporations worldwide are ramping up investments to secure and diversify these supply chains. As technology advances, the role of semiconductor chips – and the networks that sustain them – will only grow more vital.”