LGIM Thematics

London, Germany, France, Italy

ETF Securities makes thematic beta play

ETF Securities is listing three new ETFs across Europe’s major exchanges that target emerging sectors of the economy. They are:

• ETFS Pharma Breakthrough GO UCITS ETF (BIOT, BIGT, ETLI)
• ETFS Ecommerce Logistics GO UCITS ETF (ECOM, ECOG)
• ETFS Battery Value-Chain GO UCITS ETF (BATT, BATG, BATE)

BATT offers exposure to companies driving the growth of energy storage solutions worldwide, via the Solactive Battery Value-Chain Index. The Index aims to track the performance of companies that are providers of certain electro-chemical energy storage technologies and mining companies that produce metals used to manufacture batteries. The index currently has 27 companies from around the world, including Australia, Japan, the US and Korea.

ECOM tracks companies that are facilitating the logistics of eCommerce. It does so via the Solactive Ecommerce Logistics Index, which picks stocks of companies offering specific types of eCommerce related services that meet certain size and liquidity requirements around the world. 

BIOT tracks companies that are engaged in the R&D and/or manufacturing of drugs that combat rare disease. It does so via the Solactive Pharma Breakthrough Value Index, which tracks companies that actively engaged in the R&D and/or manufacturing of orphan drugs.

ETF Stream Analysis

With the smart beta arena getting too crowded too quickly it was only a matter of time until European issuers moved over to thematic beta. And on this score, ETF Securities – together with iShares UK, which also has thematic beta offerings – seems ahead of the curve. Thematic beta ETFs are different from smart beta ETFs in that they tend to target investment themes – like emerging sectors of the economy, or demographic changes, for example – to generate beta. While they’ve come of age in the US they’ve yet to really take seed in Europe. With these listings however, that seems to be changing.  

For my part at least I thought the ecommerce ETF the best among the new listings. While there are ecommerce ETFs in the US there are none that I can find in Europe. An ecommerce ETF makes sense as well. Ecommerce is booming, particularly in poorer countries. And it works as a hedge against retail or retail-focussed investments (like REITs, which are often affected by rents on malls).

If I had a slight criticism it would be that there could perhaps be better alternative tickers. For the pharma ETF, how about DRUG or PILL? And for the battery ETF, what about ACDC, JOLT or AAA? But these are quibbles. LGIM seems to have some interesting products for their new stable.