Robots, obesity, old age – whatever you want to invest in, there’s now an ETF to help you – but are they worth it?
The exchange traded fund industry has ballooned over the past decade, both in its cache of products and in assets under management.
Data from equity research firm ETFGI reveals a hike in global assets in ETFs and exchanged traded products to £51.2billion in the first quarter of this year. This compares to just £467.5million at the end of 2006.
Given that size matters when it comes to investments, many ETF providers are exploring weird and wonderful investment strategies in a bid to draw investor capital in a congested marketplace.
Cyber security investments are tipped to surge in popularity following the recent large-scale ransomware cyber attack which affected a number of organisations including the NHS
This has resulted in the advent of some rather esoteric or oddball propositions.
From aging populations to cutting edge technology, there is an ETF for nearly everything.
ETFs are of the same ilk of passive investments – those that are set up to replicate the performance of a chosen index such as the FTSE 100.
Such products are typically low cost compared to an actively managed propositions, due to a lower day-to-day management burden, and can offer investors ample diversification if the index it tracks is exposed to entire markets and a range of sectors.
Conventional ETFs have won plaudits for transparency by revealing holdings on a daily basis as opposed to mutual funds which reveal this information periodically.
However, esoteric ETFs may not be as forthcoming, and can focus on niche themes which may not attract a lot of capital – meaning profits could be eroded.
Therefore it pays to research these products before taking the plunge and injecting capital into them. Here’s our round-up of some of the market’s more unusual thematic ETFs.
An important word of warning, some of the strategies that dictate the investment approaches below are outlandish, discriminatory and in some cases extreme. This is Money does not endorse them.
Inspire Global Hope Large Cap and Inspire Small/Mid Cap Impact
Both BLES and ISMD explicitly exclude investment in companies that participate in or support the LGBT ‘lifestyle’
BLES: total expense ratio 0.61 per cent
ISMD: TER 0.61 per cent
How to access the ETF
Available via the New York Stock Exchange
These ETFs seek to root out opportunities that are aligned with the stricter biblical values. This approach explicitly excludes investment in companies that participate in or support the lesbian, gay, bisexual or transgender ‘lifestyle’.
Highly contentious areas of investment including firms involved in abortion, gambling, alcohol, pornography, terrorism and countries having oppressive systems of government are also in the ETFs’ banned list.
Both products follow the firm’s Inspire Impact Score methodology which is a rules based, scoring system to identify firms that are a ‘blessing’ to their customers, communities, workplace and the world. The funds are classified under the socially responsible banner but unlike rival products, the ETFs are not averse to investment in oil and armament stocks.
These are normally excluded from other socially responsible funds because they are typically managed to reflect the ‘progressive liberal agenda’ Robert Netzly, president and chief executive officer at Inspire Investing, explains.
‘Oil and defence are not prohibited in the Bible, so we do not screen them out as we would an abortion drug manufacturer or pornography company.’
ROBO Global Robotics and Automation GO UCITS ETF
ROBO Global Robotics and Automation GO UCITS ETF invests in companies involved in robotics, automation, and ‘enabling’ technologies across 13 sub sectors and 15 countries
TER 0.80 per cent
How to access the ETF
Available via the London Stock Exchange
‘The world is entering a new age of automation’ is the catchline introducing the investment product by ETF Securities. The investment firm claims the product was the first European ETF tracking robotics and automation industries at launch in June 2014.
The index is designed to track the performance of the ROBO Global Robotics and Automation UCITS Index which includes companies involved in robotics, automation, and ‘enabling’ technologies across 13 sub sectors and 15 countries.
The portfolio adopts a modified equal weighting scheme. It comprises of established leading players, whose core business is directly related to robotics and automation. These are called bellwethers.
The ETF is also made up of non-bellwethers – companies that have a distinct portion of their business and revenue in robotics and automation and have the potential to grow through innovation and market adoption of their products and services.
The portfolio is rebalanced on a quarterly basis to respond to new entrants and maintain diversification.
PureFunds ISE Cyber Security ETF
TER 0.60 per cent
How to access the ETF
New York Stock Exchange
Cyber security has become a more pertinent consideration for many business and government worldwide, following the recent ransomware attack affecting a plethora of companies and organisations including the NHS.
PureFund offers investor exposure to what it claims to be a burgeoning industry through its ETF. The product, which it claims is the world’s first cyber security ETF, includes companies that offer hardware, software, consulting and services to defend against cyber crime.
It seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the International Securities Exchange Cyber Security Index.
The index invests in companies that are a direct service provider – be it hardware, software or developer – for cyber security and those whose business model is defined by providing cyber security services.
It has a market capitalization of at least £77.4million.
A well as investing in companies that benefit from obesity, Janus Obesity ETF also invests in businesses that are focused on weight loss programmes and supplements, and plus sized apparel
TER: 0.50 per cent
This ETF, offered by Janus Capital Group, tracks companies that benefit from obesity and related disease, including diabetes, high blood pressure, cholesterol, heart disease, stroke and sleep apnoea.
It also invests in business that are focused on weight loss programmes and supplements, and plus sized apparel.
These companies may be found in industries including biotech, pharmaceutical, healthcare and medical devices.
At least 80 per cent of net assets are invested in stocks found within the Solactive Obesity Index. The ETF can invest in companies of any capitalisation although 90 per cent of the portfolio will invest in firms with a market cap north of £77.4million.
The product is classified as non-diversified, which allows it to hold larger positions in a smaller number of companies.
iShares Ageing Population UCITS ETF
iShares predicts that one billion of the world’s population will be aged 65 and over by 2030
TER: 0.40 per cent
London Stock Exchange
The ETF, by BlackRock, is linked to the iSTOXX FactSet Ageing Population Index, which tracks companies positioned to benefit from the world’s ageing population – defined as people aged 60 years or above.
iShares predicts that 13 per cent of the world’s population will be 65 or over, by 2030. That is more than one billion people.
The ETF invests in companies that own or operate senior living facilities, manage speciality hospitals, provide nursing services or are engaged in biotech research for age‐related illnesses.
The product can hold some securities that are not underlying constituents of the benchmark index but only if they provide similar performance and have a matching risk profile to companies that make up the index.
From time to time, the ETF may hold all constituents of the index, the investment firm said.
Adrian Lowcock said ETFs needs to get around $75m to become profitable Laith Khalaf said investors should do their homework on the more esoteric ETFs