Rize launches pet care ETF
Rize ETF, a London-based independent ETF issuer, has launched Europe’s first pet care ETF.
The launch brings the pet care theme, which has been successful in the US thanks to ProShares, to Europe for the first time.
The Rize Pet Care UCITS ETF (PETZ, KATZ) tracks the Foxberry Pet Care index.
The index holds a concentrated portfolio of 29 companies whose primary business is looking after animals. Pet care is defined in a common-sense way, and includes things like making dog/cat food, making chew toys, offering pet insurance, etc.
As with most thematic ETFs, stocks are chosen based on revenue purity. Companies making more than 20% of their revenue from pet care are eligible for inclusion. This approach means that diversified multinationals like Nestle, one of the biggest dog food companies, are excluded as pet care is only a small part of their global business. And means that agriculture companies, like those running slaughterhouses or factory farms, are removed as well as these animals are not pets.
Companies that make the cut are then weighted based on revenue purity as well. Companies with higher revenue purity receive more weight. The top 10 holdings are below.
The fund charges 0.45%.
|
Name |
Weight |
|
PET CENTER COMERCIO E PARTICIPACOES |
7.37% |
|
PATTERSON COS |
6.69% |
|
PETCO HEALTH & WELLNESSA |
6.60% |
|
FRESHPET |
6.32% |
|
IDEXX LABS. |
5.57% |
|
ELANCO ANIMAL HEALTH |
5.55% |
|
TRUPANION |
5.12% |
|
COVETRUS |
4.98% |
|
TRACTOR SUPPLY |
4.79% |
|
CHEWY |
4.37% |
|
ZOETIS |
4.04% |
Bernie’s commentary – gorgeous doggies
This fund has great marketing. Go onto the fund website and you’re swamped with images of cute dogs and cats. And then there’s the tickers. PAWZ is okay. But KATZ really hits the spot. There’s then a promotional video which is just endless footage of cuddly animals.
Marketing aside, the investment thesis behind these pet care ETFs is solid. It goes: people care more about their pet pooch than they do about the homeless or the poor. Thus they spend ever-growing sums of money to ensure rover eats premium dog food, gets luscious haircuts, and sleeps in a five-star kennel.
The demographics supporting this are married couples in major cities having fewer children. Whereas in the 1970s everyone was from a family of 3+ kids, these days most couple stop at 2 kids (if that). This creates room for dogs as substitute children. Research from Morgan Stanley forecasts that household spending on pet care will more than double this decade. The index this fund tracks has performed well, beating the MSCI World.
While the investment thesis is sound, it will be interesting to see how easy it is to sell. Convincing investors that a theme is more than a gimmick is always tricky. But my gut feel is it will be especially tricky here. Even though I personally think it’s a really solid idea.