Global X has launched a new thematic equity ETF in Europe targeting companies that produce metals and other raw or composite materials that are essential to disruptive technologies.
Morgane Delledonne, Head of Investment Strategy, Europe, Global X.
The Global X Disruptive Materials UCITS ETF has been listed on London Stock Exchange in US dollars (DMAT LN) and pound sterling (DMAG LN) as well as on Deutsche Börse Xetra (D6AT GY) and Borsa Italiana (DMAT IM) in euros.
The fund offers a relatively unexplored approach for tapping into a diverse range of emerging, new-age technologies including alternative energy sources, electric vehicles, and new age communications.
These technologies are reshaping how we interact with the world and each other by helping to slow climate change, improve productivity, or connect millions of people globally.
While one might get caught up in the advanced capabilities of these complex technologies, they still rely on certain metals and minerals as essential inputs. Specifically, the ETF targets exposure to companies with operations linked to any of the following ten disruptive materials categories: carbon fiber, cobalt, copper, graphene & graphite, lithium, manganese, nickel, platinum & palladium, rare earth elements, and zinc.
According to Global X, just as fossil fuels were critical commodities for the 20th-century economy, these disruptive materials are poised to be the essential inputs for the 21st-century economy.
Morgane Delledonne, Head of Investment Strategy, Europe, Global X, commented: “From the rise of autonomous vehicles to growth in new technologies driving a global shift toward renewable energy, major economic advancements are poised to support decades of strong demand for a range of disruptive materials. DMAT leverages Global X’s expertise in thematic investing to provide investors efficient access to the critical upstream companies involved in mining and producing the materials that are foundational to many 21st century technologies.”
Methodology
The ETF is linked to the Solactive Disruptive Materials V2 Index which selects its constituents from a universe of developed and emerging market stocks with market capitalizations above $100 million and average daily trading volumes greater than $1m.
To be considered for inclusion, a company must be classified within the basic materials, industrials, or technology sectors according to the FactSet Revere Business Industry Classifications System.
Security selection is then driven by Solactive’s proprietary natural language processing algorithm, called ARTIS, which identifies firms linked to a specific theme by screening publicly available information such as financial news, business profiles, and company publications for appropriate keywords.
Specifically, ARTIS searches for companies engaged in the exploration, mining, refining, purification, manufacture, or trading of any of the above ten disruptive materials categories.
The index then seeks to select the largest five eligible companies from each of the ten disruptive materials categories, prioritizing pure-play firms (those that derive more than half of their revenue from eligible operations) before pre-revenue firms (those that are expected to derive more than half of their revenue from eligible operations). If fewer than five companies are identified from a category, the index may include diversified firms (those that derive between 25% and 50% of their revenue from eligible operations) in a bid to meet the quota.
Constituents are weighted by float-adjusted market capitalization subject to a single security cap of 4% and a cumulative cap of 10% on all pre-revenue and diversified firms.
As of 6 September, Canadian companies accounted for over a quarter (27.8%) of the index weight with the next-largest country exposures being the US (20.8%), Australia (12.7%), and South Africa (12.5%).
Notable positions included Albemarle (7.3%), Zhejiang Huayou Cobalt (5.0%), IGO (4.0%), Allkem (4.0%), China Northern Rare Earth Group (3.7%), Lynas Rare Earths (3.7%), and Boliden (3.6%).
The ETF comes with an expense ratio of 0.59%.