WisdomTree has expanded its thematic ETF suite in Europe with a real estate fund focused on companies supporting technology and science-related megatrends.
The fund offers an alternative approach to capturing returns associated with technology-related megatrends.
The WisdomTree New Economy Real Estate UCITS ETF (WTRE) has been listed on London Stock Exchange, Deutsche Börse Xetra, and Borsa Italiana and is available in both distributing and accumulating share classes.
The fund targets the infrastructure powering the so-called ‘new economy’, a buzzword used to describe high-growth industries that are on the cutting edge of technology and are believed to be the driving force of economic growth and productivity.
According to WisdomTree, some of the technology-related megatrends captured by the strategy include cloud computing (through exposure to data centres), 5G connectivity (telecommunication tower sites), logistics (specialized buildings and warehouses), and life sciences (laboratories), among others.
Christopher Gannatti, Global Head of Research at WisdomTree, commented: “Real Estate is integral to the evolution of technologies which are being used to underpin many megatrends. Without very specific types of real estate infrastructure, technological advancements and innovations would be limited and develop at a sub-optimal pace.
“Providing exposure to the infrastructure powering the new economy allows investors to take an alternative approach to megatrend investing and represents an exciting opportunity at the verge of thematic investing and real estate.”
Methodology
The fund is linked to the CenterSquare New Economy Real Estate UCITS Index, a proprietary index developed by WisdomTree in collaboration with CenterSquare Investment Management, one of the top ten largest active real estate investment trust (REIT) managers globally.
The index begins with a developed market universe of real estate companies and REITs that have market capitalizations above $500 million and average daily trading volumes greater than $4m.
An initial ESG screen removes securities of firms that are proven violators of global norms, involved in controversial weapons, or derive significant revenue from tobacco or thermal coal.
Each remaining security is then assigned a “technology score” based on proprietary analysis conducted by CenterSquare. The scores, which range between one and ten, indicate a company’s perceived degree of overall exposure to technology and science sectors.
In generating technology scores, CenterSquare considers various factors including the proportion of revenue received from the technology, life sciences, and R&D sectors; the degree to which a company enables e-commerce, new economy logistics, or life sciences; as well as a company’s geographic footprint, the tenants it serves, and its experience implementing technology solutions. Companies with technology scores below seven are eliminated.
Finally, a quality screen aims to remove highly levered companies, defined as those with debt exceeding 70% of total market cap.
Securities are initially weighted by float-adjusted market capitalization and then adjusted to increase exposure to companies with higher technology scores, superior growth metrics (based on earnings growth, dividend growth, and funds from operations) or superior value metrics (based on price/funds from operations, enterprise value/EBITDA, and price/dividend). Individual securities are capped at 7.5%, while the cumulative weight of securities above 5% is capped at 35%. The index is rebalanced on a semi-annual basis in March and September.
The ETF comes with an expense ratio of 0.45%.
Alexis Marinof, Head of Europe, WisdomTree, said: “This launch complements our multi-award-winning thematic equity UCITS platform, which is built on innovative product development. By partnering with high-caliber sector experts like CenterSquare, we are able to deliver differentiated thematic exposures that investors cannot find elsewhere. Many investors are taking a new approach to asset allocation with themes replacing geographical allocations. Against this backdrop, 2021 was another record year in Europe for thematic ETFs with $15.3bn of inflows as investors look to megatrends to power their portfolios for long-term growth opportunities.”