Rize ETF launches payments ETF
Rize ETF, the London boutique backed by Martin Gilbert, is launching a new thematic ETF focussed on payments technology.
The Rize Digital Payments Economy UCITS ETF (PMNT) will track the Foxberry Digital Payments Economy Index.
The index is built around five sub-themes, that Rize believes capture this theme. These are: card payment networks; payment processors; payment infrastructure providers; payment services and solutions providers; and crypto currency pioneers.
Whether companies fit these themes is determined by revenue purity. For this, the index uses data from Euromonitor. Weights of stocks are also determined by revenue purity. Those with purer revenue get more weight. The fund will aim to hold 60-odd stocks.
The index is rebalanced every six months. The fund charges 0.45%.
It will compete with the L&G Digital Payments UCITS ETF (DPAG), which is slightly under-prices.
Bernie’s commentary – DPAG vs. PMNT
Why did Rize launch this ETF?
On the surface at least it might look a bit like a recreation of L&G’s DPAG. The two ETFs target the same theme, in a very similar way. But DPAG sits on just $14M under management despite listing in May 2021, making it a unusual choice for copying and under-pricing.
While similar, there are also important differences between the two funds. Crucially, PMNT includes crypto companies like Coinbase and Silvergate. This will make it perform differently (higher beta, probably). It will also likely endear it more with retail investors would be my guess.
That there should be two ETFs in this niche makes sense: payments is a promising area. The world is steadily going cashless, something Covid-19 has accelerated. This has been a boon for payments companies of all kinds. From those providing point of sales technology like Square and Adyen through to the network duopolists Visa and Mastercard.
Another great advantage for payments businesses is that they can theoretically scale to infinity. Whereas there is only so much gold in the earth’s crust for Barrick Gold to mine. And only so many humans for Apple to sell phones, payments companies face no such constraints. They can just compound up interminably, growing with the economy. Its precisely this fact that enables them to trade on such generous multiples.
However if this niche is going to have room for two, investors need to catch on. And retail in particular, needs to get a grip on the promise of fintech.
