Global X rolls out trio of thematic growth ETFs

Nov 1st, 2019 | By | Category: Equities

Global X has expanded its suite of thematic growth products with the launch of three new ETFs.

Pedro Palandrani, Research Analyst at Global X ETFs

Pedro Palandrani, Research Analyst at Global X ETFs.

Two of the funds provide access to the themes of video games/esports and cybersecurity, while a third offers diversified exposure across several themes using an ETF-of-ETFs format.

They are the Global X Video Games & Esports ETF (HERO US), the Global X Cybersecurity ETF (BUG US) and the Global X Thematic Growth ETF (GXTG US) respectively.

The funds have been listed on Nasdaq Exchange and come with an expense ratio of 0.50%.

Pedro Palandrani, Research Analyst at Global X ETFs, commented, “We are excited to expand our offerings with two new disruptive technology funds and the multi-theme Global X Thematic Growth ETF.

“As disruption accelerates across the global economy, investors are looking for targeted and efficient solutions to gain access to these trends. Through our extensive thematic growth suite, we now offer investors access to seventeen individual themes as well as a fund-of-funds thematic solution.”

Video Games/Esports

The video games & esports ETF tracks the Solactive Video Games & Esports Index.

The index selects its constituents from a universe of developed market stocks and American Depository Receipts (ADRs) of emerging market companies. To be eligible for inclusion, a company must have a market cap in excess of $200 million, a free-float of at least 10%, and average daily trading volume greater than $2m

The index methodology uses the FactSet Revere Business Industry Classification System (RBICS) to screen for companies with at least 50% of their total revenue derived from business activities linked to the video games and Esports theme.

Eligible companies include those that develop or publish video games, facilitate the streaming and distribution of video gaming or esports content, own or operate within competitive esports leagues, or produce hardware used in video games and esports.

Constituents making it through this screening round are evaluated using a natural language processing algorithm that searches in company documents for words related to video games and esports. The stocks are then ranked according to the frequency that these keywords appear, thus offering an insight into how closely the firm is aligned with the theme.

The index selects 40 of the highest-ranked stocks and weights them by float-adjusted market cap. Individual stocks are capped at 6% and the cumulative weight of stocks with weights above 5% is capped at 40%.

Cybersecurity

The cybersecurity ETF tracks the Indxx Cybersecurity Index.

The index is derived from the same universe of developed market stocks and ADRs of EM companies and also uses FactSet’s RBICS to screen for companies with more than 50% revenue exposure to activities linked to the cybersecurity theme.

Eligible companies include those involved in developing and managing security protocols to prevent intrusion and attacks on systems, networks, applications, computers, and mobile devices.

Similarly, the index selects 40 of the highest-ranked stocks and weights them by float-adjusted market cap. Individual stocks are capped at 6% and the cumulative weight of stocks with weights above 5% is capped at 40%.

Multi-theme

The thematic growth ETF tracks the Solactive Thematic Growth Index which provides broad multi-theme exposure by allocating to a selection of Global X’s thematic growth ETFs.

The eligible universe includes 17 Global X ETFs that target the following themes: future analytics tech, health and wellness, robotics and artificial intelligence, autonomous and electric vehicles, fintech, lithium and battery tech, longevity, millennials, US infrastructure development, internet of things, social media, e-commerce, genomic and biotechnology, cloud computing, cannabis, video games and Esports, and cybersecurity.

The methodology assigns each ETF to one of eight “ETF sectors” – communication services, consumer discretionary, energy and transportation, financials, health care, industrials, information technology, and utilities – based on the dominant sector exposure for that fund.

Each ETF is then assigned an “aggregate realized sales growth” number based on the weighted average revenue growth of all the companies held within its portfolio. Within each ETF sector, the ETF with the highest aggregate realized sales growth is selected for index inclusion.

The weighting methodology works by first assigning each ETF a starting weight of 7.5%. ETFs with aggregate realized sales growth in the top half receive a further 7.5% weight, while the ETF with the highest aggregate realized sales growth receives an additional 7.5%. The remaining unallocated weight is then distributed equally among all ETFs.

The index is rebalanced on a semi-annually and reconstituted annually. The current weights, as of 1 November, are: Global X Social Media ETF (23.8%), Global X Fintech ETF (16.9%), Global X E-Commerce ETF (16.8%), Global X Internet ETF (11.0%), Global X Robotic ETF (11.0%), Global X Lithium ETF (10.3%), Global X Longevity ETF (10.2%).

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