Exchange-traded funds (ETFs) have recently seen tremendous growth as an asset class. The first U.S. ETF, the SPDR S&P 500 ETF Trust (NYSE:SPY), was launched in 1993. The fund tracks the returns of the S&P 500 index, and assets under management total nearly $396 billion.
According to the NYSE’s second-quarter report, metrics suggest that as of June 30, there were currently 2567 ETFs stateside, totaling about $6.6 trillion in assets. On any given trading day, an average of $1.52 billion worth of shares change hands.
Analysts cite numerous reasons for the exponential growth in the popularity of ETFs. For instance, such funds give investors access to diversified portfolios, typically in a cost-effective manner. Fund managers do the fundamental research that might otherwise be difficult or time-consuming for the average investor. Finally, the stay-at-home days of the pandemic saw an army of new investors who wanted to take advantage of dips in share prices seen in the early days of Covid-19 in the spring of 2020. The result was big growth in the number of ETFs as well as fund flows.
Increasing investor interest has prompted fund managers to launch thematic ETFs that capture evolving trends likely to see significant growth in the coming years. Such niche themes typically focus on disruptive tech forces and changes in consumer behavior. As a result, investors can participate in such developments and potentially see their portfolios grow.
By law, ETFs are mostly transparent and provide public information regularly. As a result, investment styles and holdings of most funds are simple to understand for investors. Today’s article introduces three such ETFs recently launched by ProShares.
- ProShares Big Data Refiners ETF (NYSEARCA:DAT)
- ProShares S&P Kensho Smart Factories ETF (NYSEARCA:MAKX)
- ProShares S&P Kensho Cleantech ETF (NYSEARCA:CTEX)
These funds focus on exciting trends in technology, appealing to a range of investors who want to diversify their portfolios. However, we should remind our readers that all three funds are new and small, without much trading history.
New ETFs: ProShares Big Data Refiners ETF (DAT)
52-Week Range: $39.59 — $42.90
Expense Ratio: 0.58% per year
Technology is fast-growing and with that growth comes big data, aka data sets that contain “greater variety, arriving in increasing volumes and with more velocity. This is also known as the three Vs,” according to Oracle (NYSE:ORCL).
Research by Raag Agrawal of Columbia University and Sudhakaran Prabakaran of University of Cambridge points out, “Big Data will be an integral part of the next generation of technological developments.”
The ProShares Big Data Refiners ETF invests in businesses with products that help customers process big data. Those clients come from almost every industry, including financial services, healthcare, media, education, manufacturing, retail and transportation as well as government services. Clients can use big data to draw competitive insights to gain a useful, or even crucial, edge over their peers.
DAT, which has 30 holdings, tracks the returns of the FactSet Big Data Refiners Index. Over 92% of the firms come from the U.S. Next in line are those headquartered in Israel (5.17%), Australia (0.67%), and others.
In terms of the sub-sectoral breakdown, information technology (IT) comprises the highest portion of the fund with 96.89% of holdings, followed by consumer discretionary (1.95%) and financials (1.16%). The fund’s top 10 holdings account for about 55% of net assets. In other words, this is a top-heavy fund, and thus would likely be sensitive to price changes in these names.
Analytics platform Datadog (NASDAQ:DDOG), database platform MongoDB (NASDAQ:MDB), software intelligence platform Dynatrace (NYSE:DT), cloud computing and data management company Splunk (NASDAQ:SPLK) and cloud data platform Snowflake (NYSE:SNOW) lead the names in DAT.
The fund started trading on September 30 at an opening price of $40.79. Now, DAT hovers around $42.50, implying a return of more than 4% in less than a month. We should remind readers that a busy quarterly reporting season is here. Therefore, many names that make up the fund could be volatile or even come under pressure, which could make a better entry point for buy-and-hold investors.
ProShares S&P Kensho Smart Factories ETF (MAKX)
52-Week Range: $39.03 — $41.45
Expense Ratio: 0.58% per year
From datasets we move on to smart manufacturing, which combines modern technologies with manufacturing. Readers might also see terms such as “intelligent factory” or “digital factory” used to talk about these firms. According to Mordor Intelligence, “The Global Smart Factory Market was valued at USD 270.74 billion in 2020, and it is expected to reach USD 422.88 billion by 2026, registering a CAGR of approximately 9.33% during the forecast period (2021-2026).”
Our second fund, the ProShares S&P Kensho Smart Factories ETF, gives investors exposure to businesses helping to automate manufacturing activities. Per Deloitte, smart factories are “a leap forward from more traditional automation to a fully connected and flexible system… that can use a constant stream of data from connected operations and production systems to learn and adapt to new demands.”
Put another way, smart factories represent “responsive, adaptive, connected manufacturing.”
MAKX, which tracks the returns of the S&P Kensho Smart Factories Index, currently holds 24 stocks. Sectors represented in the fund include IT (77.25%) and industrials (22.75%). The leading 10 names account for more than 55% of net assets.
Among those leading holdings are Rockwell Automation (NYSE:ROK), which provides industrial automation solutions, 3D Systems (NYSE:DDD), which focuses on 3D printing solutions, machine vision products provider Cognex (NASDAQ:CGNX), asset optimization solutions provider Aspen Technology (NASDAQ:AZPN) and chipmaker Ambarella (NASDAQ:AMBA).
This fund also began trading on September 30 at an opening price of $40.21, and is currently around 41.50. Interested readers should keep MAKX on their radar screen.
ProShares S&P Kensho Cleantech ETF (CTEX)
52-Week Range: $39.27 — $44.63
Expense Ratio: 0.58% per year
Our final discussion centers around clean technologies that aim to use “energy, water and other inputs more efficiently and effectively” while creating less waste. Over the past several years, investors have seen countries, businesses and consumers alike put greater emphasis on sustainability and environmental protection.
Recent research suggests that the global clean energy technologies market was worth “approximately USD 283.9 Billion in the year 2020. The projected value of the market is predicted to be about USD 423.7 Billion by 2026 year-end.”
Put another way, the market could grow close to 7% a year for the first half of the decade. As a result, Wall Street is paying close attention to businesses whose innovative products could help move toward greener technologies.
The ProShares S&P Kensho Cleantech ETF invests in firms at the forefront of developing cleaner technologies, focusing on alternative resources such solar, wind, hydro, and geothermal resources.
CTEX, which has 29 stocks, tracks the returns of the S&P Kensho Cleantech Index. Over three-quarters of the holdings come from the U.S, followed by China (11.06%), Canada (6.67%), Singapore (3.51%), and India (2.64%).
In terms of the sub-sectoral breakdown, we see industrials with the largest slice (46.87%). Next in line are IT (35.38%), utilities (10.63%), consumer discretionary (4.68%), and materials (2.45%). The leading 10 names account for almost 45% of the fund.
China-based JinkoSolar (NYSE:JKS), which is one of the most important solar panel manufacturers worldwide, electric vehicle (EV) darling Tesla (NASDAQ:TSLA), First Solar (NASDAQ:FSLR), which provides provider of photovoltaic (PV) solar energy solutions, as well as Sunnova Energy (NYSE:NOVA) and Enphase Energy (NASDAQ:ENPH), which offer residential solar and energy storage services, lead the holdings in the fund.
Like the other two ETFs we’ve discussed, CTEX was also listed at the end of September. In the past several weeks, the fund returned around 8%. Potential investors should expect choppiness during the current earnings season.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Tezcan Gecgil, Ph.D., has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all three levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.