The range of tech and innovation investment options available to Australian investors has expanded in recent weeks, with the launch of two new exchange traded funds.
ETF Securities has launched FANG+ ETF, which holds an equal weighted portfolio of overseas stocks, including Facebook, Apple, Amazon, Netflix, Alphabet (Google), Alibaba, Baidu, NVIDIA, Tesla and Twitter.
The stocks cover the e-commerce, entertainment, automotive and media sectors. NVIDIA is a leading computer graphics company and Baidu is a Chinese equivalent to Google.
The portfolio is based on an index designed by the New York Stock Exchange to provide a wider tech exposure than the popular FAANG stocks. The total market capitalisation of the 10 companies is US$4.7 trillion.
At the same time BetaShares has launched an ETF that provides exposure to the Australian tech sector. The BetaShares S&P/ASX Australian Technology ETF tracks an index that includes Wisetech, REA Group, Xero, Afterpay and Carsales.com.
Both funds are based on indexes that have performed strongly in recent years.
The NYSE FANG+ Index has produced a 25.6 per cent annual return (in US dollars) since it was launched in 2014. This compares with a return of 17.1 per cent a year for the Nasdaq 100 over the same period and a return of 20.4 per cent a year for the S&P 500 Information Technology Sector Index.
ETF Securities chief executive Kris Walesby says: “This fund is for investors looking for a high growth portfolio. There will be market volatility along the way. This is not for retirees.”
The FANG+ ETF is equal weighted, rather than asset weighted. This means that each of the 10 stock has the same value in the portfolio. To achieve this the portfolio is re-weighted quarterly.
Walesby says: “While the performance of indexes weighted by market capitalisation can be dominated by a few of the largest stocks, an equal weighting approach allows for a more diversified and representative portfolio. The smaller stocks in the portfolio can have an impact on performance.”
ETF Securities is charging a fee of 35 basis points for the FANG+ ETF.
The S&P/ASX All Technology Index that the Betashares ETF is based on has returned 16.6 per cent a year since it was launched in 2014, compared with a 9.3 per cent return for the S&P/ASX 200 Index over the same period.
BetaSares chief executive Alex Vynokur says: “The Australian market is heavily concentrated in banks and resource companies, and the technology sector currently makes up less than 5 per cent of the ASX 200. At the same time, few would dispute that Australia’s future is very much tied to technology and innovation.”
To be included in the S&P/ASX All Technology Index a company must have a market cap of at least $120 million, meet a minimum liquidity threshold and be part of a broad technology sub-sector classification. There are currently 46 stocks in the index.
BetaShares is charging a fee of 48 basis points for the fund.