Exchange-traded funds (ETFs) focused on niche trends have been attracting investors’ attention of late. Since the introduction of the first U.S. ETF, the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) in 1993, the number of funds available for investors has risen significantly. As of October 2021, there were well over 2,650 ETFs stateside. Meanwhile, assets under management in U.S.-listed ETFs are fast approaching $7 trillion.
A recent survey by JP Morgan Chase (NYSE:JPM) highlights, “Although active ETFs remain a relatively small segment of the overall ETF market, the percentage of respondents with active ETF exposure has risen to 54%, up from 31% in 2020.”
The research further posits, “Positions in thematic funds have increased significantly since 2020 and are set to increase further over the next two to three years, as respondents move more assets into the technology and environmental themes in particular.”
Regular InvestorPlace.com readers would know that we introduce new and thematic ETFs frequently — for example, here. Today, we extend our discussion to three other new niche funds launched on October 26 by ProShares. The following three ETFs could appeal to a range of readers looking to diversify their portfolios in the coming weeks.
Here are 3 new ProShares ETFs built for the trends of the future:
- ProShares Smart Materials ETF (NYSEARCA:TINT)
- ProShares Nanotechnology ETF (NYSEARCA:TINY)
- ProShares On-Demand ETF (NYSEARCA:OND)
As these funds are new and still small, they have no trading history. Therefore, potential investors should do proper due diligence before hitting the ‘buy’ button.
ETFs Built for the Future: ProShares Smart Materials ETF (TINT)
Expense Ratio: 0.58% per year
Metrics suggest that in 2021, we will see a compound annual growth rate (CAGR) of 6.9% in the market for global smart materials, “materials reacting to external stimulations and have one or more properties. We could also call them responsive materials. These objects can change shape or behaviors with hot water, pressure, chemical, light or heat.”
The ProShares Smart Materials ETF is the first pure-play that gives access to companies at the cutting edge of this exciting growth area. These firms might be developing, researching, or producing smart materials.
TINT has 30 holdings and tracks the returns of the Solactive Smart Materials Index. Over half of the companies come from the U.S., followed by South Korea (16.73%), France (11.59%), Switzerland (5.11%) and others.
In terms of the sub-sectoral breakdown, the materials sector comprises the highest portion with 67.87%. Next in line are information technology (16.97%), industrials (13%) and healthcare (2.16%). The fund’s top 10 holding account for 47% of all holdings in the fund.
The leading names in the roster include: South Korean chemicals manufacturer Hansol Chemical; Sherwin-Williams (NYSE:SHW), which manufactures paints and coatings; Swiss specialty chemicals group Sika (OTCMKTS:SXYAY); Netherlands-based producer of fertilizers and industrial chemicals Oci (OTCMKTS:OCINF); and France-based manufacturer of aluminium rolled products Constellium (NYSE:CSTM).
Due to the adoption of smart materials in numerous end-markets, such as automotive, consumer goods, defense and aerospace, electronics and healthcare, we’re likely to increasingly hear the names of many of the companies in the fund.
ProShares Nanotechnology ETF (TINY)
Expense Ratio: 0.58% per year
From smart materials we move on to nanotechnology, “the study and application of extremely small things and can be used across all the other science fields, such as chemistry, biology, physics, materials science, and engineering,” according to the National Nanotechnology Initiative.
Our second fund for today, the ProShares Nanotechnology ETF invests in businesses using nanoscience across numerous industries. Nanotechnology applications are, for example, found in agriculture, electronics, energy, food science, manufacturing, materials, medicine, smart cities and treatment of water resources.
TINY, which has 30 holdings, tracks the returns of the Solactive Nanotechnology Index. In terms of sub-sectors, we see IT (69.05%), health care (26.75%), and materials (4.20%).
The leading 10 stocks comprise around 53% of the fund. About two-thirds of the companies come from the U.S., followed by Israel (7.41%), the Netherlands (5.41%), Japan (4.62%), Taiwan (4.35%), and the U.K. (3.26%) among others.
Biotechnology group Moderna (NASDAQ:MRNA); semiconductor heavyweights Advanced Micro Devices (NASDAQ:AMD); ASML (NASDAQ:ASML); Agilent Technologies (NYSE:A), which offers analytical instruments and software for labs as well as life sciences and chemicals markets and Entegris (NASDAQ:ENTG), which provides advanced materials and process solutions mainly for the semiconductor industry, lead the stocks in the ETF.
Recent metrics suggest, “The global nanotechnology market size was valued at $1.76 billion in 2020, and is projected to reach $33.63 billion by 2030, registering a CAGR of 36.4% from 2021 to 2030.” Investors looking for a pure-play nanotechnology fund should keep TINY on their radar.
New ETFs: ProShares On-Demand ETF (OND)
Expense Ratio: 0.58% per year
Pandemic months have seen the growth of “stay-at-home and work-from-home” trends. As a result, we’re also witnessing significant reliance on the on-demand economy, defined as “a business, service, or product built on letting users request a physical object, a piece of data, or service and have that request fulfilled. It’s built on the concept of instant gratification, the psychological feeling consumers get when they can instantaneously make a transaction, and possibly follow the path of it all the way to fulfillment.”
The last fund we’re covering today, the ProShares On-Demand ETF, provides exposure to businesses that deliver on-demand services by connecting services and technologies. OND, which has 34 holdings, tracks the returns of the FactSet On-Demand Index.
In terms of the sub-sectoral breakdown, the communication services sector has the highest slice with 61.72%, followed by consumer discretionary (25.84%), industrials (10.16%) and IT (2.29%). The leading 10 stocks account for over half of OND.
About 57% of the companies are U.S-headquartered. The rest come from China (16.20%), Luxembourg (5.97%), Germany (4.83%), Japan (3.98%) and others.
Online food ordering platform DoorDash (NYSE:DASH), subscription-based entertainment provider Netflix (NASDAQ:NFLX), audio streaming services Spotify Technology (NYSE:SPOT), and video game publishers Take-Two Interactive Software (NASDAQ:TTWO) and Electronic Arts (NASDAQ:EA) lead the names in OND.
Recent metrics show that “U.S. consumers are spending $57.6 billion in the on-demand economy to cater to 22.4 million users annually.” Those readers who believe we’re likely to see further growth in the segment could consider researching OND further.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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.
