ETFs focusing on innovation may have been around for a few years now, but have really gained popularity last year and look set to take on 2021.
A good variety to choose from have caught the eye of investors around the globe.
What are they all about?
We have come to know ETFs as a selection of companies that try to mimic indices, markets or a particular industry. Innovation ETFs consist of companies that are likely to disrupt a particular field, or a selection of industries.
In the past year, the world has focused on battling the pandemic and we found ourselves in a stay-at-home type of situation. It was expected that we have seen the most growth and innovation in information/communication technology and medical fields. Logically then, innovation ETFs will look towards companies in these sectors to make up the bulk of the portfolio. A deeper look into some of the leading innovation ETF's should give us a clue as to where disruption is likely to come from in 2021.
ARK Invest is a company best known for innovation based ETFs. ARK defines ''disruptive innovation'' as the introduction of a technologically-enabled new product or service that potentially changes the way the world works. Let's have a look at the two most popular:
ARK Next Generation Internet ETF (ARKW)
Performance over 1-Year: 127.6%
3-Month Average Daily Volume: 735,924
Assets Under Management: $2.9 billion
Inception Date: September 30, 2014
Past performance is not an indication of future results.
ARK Innovation ETF (ARKK)
Performance over 1-Year: 116.4%
3-Month Average Daily Volume: 2,475,250
Assets Under Management: $9.9 billion
Inception Date: October 31, 2014
O'Shares Investments, owned by Shark Tank star Kevin O'Leary, provides ETFs for long-term wealth management This is their take on innovation ETF:
O'Shares Global Internet Giants ETF (OGIG)
Performance over 1-Year: 101.0%
3-Month Average Daily Volume: 221,773
Assets Under Management: $487.0 million
Noticeable trend in the general makeup of the top ETFs is that they consists of companies invested in DNA technologies (genomics), energy storage, autonomous technology, next-generation Internet services, and fintech.
This explains why they include tech giants Apple, Amazon, Microsoft and also carmaker Tesla. The well known brands often blended with smaller fast-growing stocks, that ETF managers have identified as having genuine innovation potential.
ARK also bets heavily on Illumina, which the company COO Tom Staudt identified as ''holding a 90% share in a market about to explode''
More innovation, yet industry specific ETFs worth looking at are iShares Healthcare Innovation UCITS ETF, Lyxor MSCI Disruptive Technology ESG, Global X Internet of Things ETF (SNSR), ARK Industrial Innovation ETF.
Kalin Tsenov has a strong research background in economics with specific interests in Geopolitics and its impact on the Financial Markets.
He joined FXCM in 2018 after obtaining a Bachelor's Degree from Leeds Metropolitan University. Initially starting as a Business Analyst in the Payment Solutions department, he is currently a Product Specialist in the Firms Product & Strategy department.