Invesco launches ETF tracking new S&P 500 Communications sector

Sep 18th, 2018 | By | Category: Equities

Invesco has broadened its range of US sector ETFs with the launch of the Invesco Communications S&P US Select Sector UCITS ETF (XLCS LN) on London Stock Exchange.

Invesco Communications services

The newly created Communications Services sector tracks the performance of household names such as Twitter, Google (via Alphabet), Facebook, Netflix and Disney.

The fund provides exposure to the newly created Communications sector of the S&P 500 Index.

Chris Mellor, Head of EMEA ETF Equity Product Management at Invesco, explained, “Communication has changed dramatically in recent years, with digital technology providing easy and instant access for just about anything you want…people now get their news from online feeds and watch on-demand movies on their mobile devices, whenever and wherever they choose. Companies that provide these services are benefiting from huge demand from a truly global customer base.”

The sector was introduced by S&P Dow Jones Indices and MSCI following their latest annual review of the Global Industry Classification Standard (GICS).

The shake-up of GICS aims to facilitate a transformation of the existing Telecommunications Services sector to include those companies involved more widely and directly in the new communication era, including selected companies from the Information Technology and Consumer Discretionary sectors.

While the new sector currently contains just 26 stocks, its constituents include some of the largest and most innovative companies in the world with household names such as Twitter, Google (traded as Alphabet), Facebook, Netflix and Disney making the list. The sector accounts for around 10% of the entire market capitalization of the S&P 500.

Mellor said, “The new sector is significant in terms of size and economic exposure, and the greater number of stocks enables us to create a diversified, investable fund to track its performance. The old Telecommunication Services sector contained only three stocks, so you couldn’t create a standalone fund for it and instead it was combined with the IT sector in our Technology sector ETF.

“Plus, those companies are defensive in nature whereas the new, broader Communications sector will offer higher growth potential, albeit with higher risk, and give investors the opportunity to access more cyclical companies.”

The fund tracks the S&P Select Sector Capped 20% Communication Services Index which weights constituents by float-adjusted market cap subject to a single stock limit of 20% at rebalance. Rebalancing occurs quarterly in March, June, September and December.

XLCS trades in US dollars but a pound sterling-denominated share class is also available under the ticker XLCP LN. It comes with a total expense ratio (TER) of 0.14% – priced in line with other funds in the range.

The range, which also includes consumer discretionary, consumer staples, energy, financials, health care, industrials, materials, real estate, technology and utilities sector ETFs, provides investors with a toolkit to manage US equity sector exposure through different stages of the economic cycle, or to complete portfolios (fill a gap in portfolio exposure) or tilt them towards specific themes on an opportunistic basis.

The range collectively houses nearly $1.9bn in assets under management with funds ranging in size from the $6m Invesco US Materials Sector ETF to the $544m Invesco US Technology Sector ETF.

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