ProShares has introduced a multi-themed equity ETF targeting companies that are benefitting from an array of secular trends – trends that have mostly accelerated because of the Covid-19 pandemic.
Michael L. Sapir, CEO of ProShares.
The ProShares MSCI Transformational Changes ETF (ANEW US) has listed on NYSE Arca and comes with an expense ratio of 0.45%.
The fund is linked to the MSCI Global Transformational Changes Index which selects its constituents from the MSCI ACWI universe of large- and mid-cap stocks across both developed and emerging markets.
Methodology
The index methodology works by screening for stocks across four thematic buckets: Future of Work, Digital Consumer, Genomics & Telehealth, and Food Revolution.
Companies considered appropriate for these buckets are identified by MSCI based on the frequency of relevant keywords found in their names, business summaries, and annual reports, which, in turn, are mapped to and corroborated with third-party industry classifications.
Companies assigned to the Future of Work category are defined as those with operations linked to cybersecurity, industrial automation, machine learning, artificial intelligence, digital transactions, blockchain technology, cloud computing, and internet of things sub-themes.
Digital Consumer companies are those that operate within the e-commerce, social media, and e-gaming sub-themes.
Genomics & Telehealth companies are those linked to gene editing and therapy, molecular diagnostics, targeted therapeutics and stem cell therapy, bioinformatics, bio-hardware, and digital health.
Food Revolution companies are defined as those companies focused on sustainable and responsible farming, plant-based meat substitutes, agricultural technology, food delivery technology, biosecurity sub-themes.
After identifying and assigning companies to the buckets, MSCI calculates a thematic relevance score for each company based on the proportion of its revenue derived from activities linked to the relevant sub-themes. Firms that are not yet reporting revenue have their score calculated according to the proportion of company assets dedicated to future operations linked to the sub-themes.
Stocks with relevance scores in the bottom 50% of each of the four thematic buckets are removed from the selection pool, as are companies with an average daily trading volume below $1 million.
Within each of the buckets, companies are then ranked in descending order by thematic score and, again, by market capitalization. Those firms that fall within the top quarter of both rankings are selected to constitute the index. Companies that operate across more than one theme and only have a sufficiently strong thematic relevance score when considering the company’s operations across multiple themes are also included.
The index’s weighting scheme assigns each bucket an equal 25% share in the index, with the constituents of each bucket weighted using a combination of their float-adjusted market capitalization and thematic relevance score. Individual security weights are capped at a maximum of 2%. The index is reconstituted and rebalanced on a semi-annual basis.
The index has 143 constituents with over three-quarters (76.8%) of the total weight presently allocated to stocks in the US, followed by China with 7.8%, Switzerland with 4.0%, and Germany with 2.8%. Health care (27.9%) and information technology (25.4%) currently account for the largest sector exposures, while communication services (19.4%) and materials (11.8%) also playing significant roles.
Perhaps not surprisingly, the index displays a price-to-earnings ratio markedly higher than the parent universe – 47.6 compared to the MSCI ACWI IMI at 25.0. The dividend yield similarly reflects the index’s growth orientation with a yield of 0.8% compared to 2.0% for the MSCI ACWI IMI. These ratios are in part, a by-product of the index’s strong recent performance, up 26.1% year to date versus 0.5% for the MSCI ACWI IMI. (All data as of September 30, 2020).
Reshaping the world
Michael L. Sapir, CEO of ProShares, commented, “Many global industries are experiencing rapid transformational changes that may offer compelling investment opportunities. ANEW is designed to harness the potential growth of these companies as they reshape our new world.”
Scott Helfstein, Executive Director, Thematic Investing at ProShares, added, “Consider the big picture: AI and robotics may yield savings of up to 40%, the cost of sequencing a human genome has dropped 99% in 15 years, and e-commerce has grown at an annualized rate of 82% in 2020—these are dramatic changes.
“The way we behave as workers and consumers is changing – accelerated by Covid-19 – and investors should pay attention to the companies evolving to meet these challenges.”