SoFi unveils ‘Web 3’ thematic ETF

Aug 12th, 2022 | By | Category: Equities

Online personal finance and investment company SoFi Technologies has launched a thematic equity ETF targeting companies powering ‘Web 3’, a future iteration of the internet characterized by blockchain technology, artificial intelligence, and the metaverse.

Anthony Noto, CEO of SoFi Technologies

Anthony Noto, CEO of SoFi Technologies.

The SoFi Web 3 ETF (TWEB US) has been listed on Nasdaq with an expense ratio of 0.59%.

Looking back at the historical development of the internet, Web 1 represented the initial collection of links and homepages which could be viewed by users but lacked meaningful interaction. This version of the internet was primarily about businesses being able to share essential information.

Web 2 refers to the period when users not only consumed content but created their own through channels such as blogs, media platforms, and marketplaces. While Web 2 created many ‘free’ services such as search engines, email, e-commerce, and social media, the primary criticism of this version is the privacy and security concerns for users whose data has been harvested at scale by large tech firms.

Indeed, the notion of Web 3 is being driven by a desire to combat these privacy and security concerns, shifting power back towards individuals and away from the dependency on large tech companies like Amazon, Alphabet, Facebook (Meta), Twitter, and Netflix.

By utilizing decentralized operational structures, blockchain technologies, and cryptocurrencies, Web3 aims to put the ownership and control of peoples’ data back into their own hands. Users will be able to engage with Web 3 through their crypto wallets, allowing them to monetize their data or take it with them when they log off.

Anthony Noto, CEO of SoFi Technologies, said: “SoFi has a unique perspective on how the next generation spends, saves, and invests their money given our breadth of products. With this next phase of ETF launches, we’re focusing on funds that help people get their money right while also allowing them to invest in what they are most passionate about right now. We know many of our members look at Web 3 as an important part of the future, and we are thrilled to be providing a low-cost investment vehicle designed to meet those interests.”

Investment approach

The fund is linked to the SoFi Solactive ARTIS Web 3.0 Index which selects its constituents from a universe of developed market stocks with market capitalizations above $100 million and average daily trading volumes greater than $1m.

The methodology screens for Web 3 companies that derive at least 50% of their revenues from products and services in one of the following four industry categories: Big Data & Artificial Intelligence, Blockchain Technology, the Metaverse, and NFT & Tokenization.

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.

The index includes 40 stocks, selecting the ten stocks from each industry category with the highest thematic relevance scores. The four industry categories are equally weighted and, within each category, constituents are weighted according to their rank (the company with the highest thematic relevance score receives a ranking score of 10, the second-highest a score of 9, and so on).

As of the end of July, stocks from the US accounted for over three-quarters (76.8%) of the total index weight with the next-largest country exposures being Japan (8.1%), Canada (6.2%), and the UK (5.6%).

Notable positions included Vuzix (8.5%), DraftKings (5.0%), Albert (4.8%), GameStop (4.6%), AMC Entertainment (4.6%), Nvidia (4.5%), Alphabet (4.0%), 1stdibs.com (3.4%), and Hive Blockchain Technologies (3.4%).

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