US Global Investors, the Texas-based investment adviser behind the $3.4 billion US Global Jets ETF (JETS US) and its European domiciled equivalent, US Global Jets UCITS ETF (JETS LN), has launched a new thematic equity ETF providing exposure to sea shipping and air freight industries worldwide.
The fund is the only shipping ETF to also offer exposure to air freight companies.
Listed on NYSE Arca, the US Global Sea to Sky Cargo ETF (SEA US) offers investors convenient access to the structural growth opportunity captured within the global shipping industry.
Commenting on the launch, Frank Holmes, CEO and CIO of US Global Investors, said: “Global trade is a long-term secular story at the centre of which is the global middle class. So far this century, trade has steadily increased with few interruptions as the number of people classified as middle class has continued to expand, particularly in China and India.
“Although the pandemic has stalled household income growth in some regions, an incredible one billion Asians are forecast to join the middle class by 2030. Most of these new entrants will likely seek a middle-class lifestyle, which we expect will support shipping and logistics companies for years into the future.”
The fund gains its exposure by tracking the proprietary US Global Sea to Sky Cargo Index which utilizes a smart beta multi-factor approach to select and weight stocks so as to emphasize size, quality, and value risk premia.
The index begins with an initial universe of developed and emerging market companies classified to the marine shipping, port and harbour, and air freight and courier industries. Eligible constituents must have market capitalizations above $100 million and average daily trading values greater than $5m.
Each stock in the universe is assigned a composite multi-factor score based on its performance across four metrics: market capitalization, cash flow return on invested capital, earnings-to-price ratio, and cash-flow-to-price ratio.
As of each quarterly reconstitution and rebalance, 70% of the index weight is allocated to firms in the marine shipping and port and harbor industries, and the remaining 30% is allocated to air freight and courier companies.
For the air freight and courier segment, the ten companies with the highest composite scores and market capitalizations above $200m are equally weighted at 3% each.
The marine shipping and port and harbour segment is slightly more complicated. The six companies with the highest composite scores and market capitalizations above $400m are weighted at 5% each; the next seven highest-scoring companies with market capitalizations above $300m are weighted at 4%, and the next six highest-scoring companies with market capitalizations above $100m receive 2%.
Following the most recent rebalance, just over one-quarter (27%) of the index was allocated to US-listed stocks with the next-largest country exposures being Hong Kong (19%), Taiwan (14%), Japan (14%), and Germany (7%).
The ETF comes with an expense ratio of 0.70%, although the first $100 million invested in the fund will benefit from lower fees of 0.60%.
The fund is the third ETF, after the Breakwave Dry Bulk Shipping ETF (BDRY US) and the SonicShares Global Shipping ETF (BOAT US), to play the shipping theme, although it does differentiate itself from these funds by being the only ETF to go beyond maritime shipping to include exposure to the air freight industry.