Global X Research TeamAccess Multiple Disruptive Trends, In One ETF
Disruption is everywhere. Innovative technologies are upending existing business models and bringing new capabilities to the global economy. Shifts in demographics and consumer preferences are impacting which products and services people buy. And a growing need for modernized infrastructure and to conserve and protect natural resources is altering how we interact with the physical environment.
Over the last 10 years Global X has identified several of these powerful themes and developed targeted ETFs to provide investors with efficient access to the companies that are well-positioned to benefit from these disruptions. With the latest launches of the Global X Blockchain ETF, Global X AgTech & Food Innovation ETF and Global X Hydrogen ETF, we offer around 30 ETFs that target high conviction, investable, long-term themes.
Investor interest in thematic investing has increased as well, with aggregate Thematic ETF AUM reaching $143.2B at the end of Q2, up 246% from $41.3B at the end of Q2 2020.1 Yet as disruption finds its way into more corners of the economy and investors increasingly look to gain exposure to an expanding roster of themes, we recognized the need to create an all-in-one thematic solution.
The Global X Thematic Growth ETF is designed to allocate across our thematic growth suite of ETFs, helping investors efficiently navigate which themes offer the most attractive growth opportunities and how to weight and diversify across those themes in a portfolio. GXTG is intended to serve as multi-theme solution that investors can add as a long-term position in a growth-oriented portfolio. Alternatively, investors can use GXTG as a core thematic position in conjunction with using individual thematic ETFs to tilt or complement the fund’s exposures.
How GXTG Works?
Tracking the Solactive Thematic Growth Index, GXTG seeks to invest in seven thematic ETFs that exhibit the highest growth characteristics within the sectors they are disrupting.
- Starting Universe: GXTG’s universe of possible investments comprises of Global X ETFs that provide exposure to structurally disruptive macro-trends, which typically eschew traditional sector and geographic classifications, and may stem from advancements in disruptive technology, changing consumer habits and demographics, or changing needs for infrastructure or finite resources.
- Sector Classification: For the purposes of selection and weighting, each potential thematic ETF is assigned a sector based on which aspects of the economy it is primarily disrupting. For example, FinTech is assigned to Financials, while Lithium & Battery Tech is assigned to Energy & Transportation.
- Selection: For each ETF in the starting universe, the index provider, Solactive AG, calculates an aggregate sales growth number based on the weighted average revenue growth of all the companies held by the ETF. The ETF with the highest sales growth within its sector assignment is selected for inclusion.
- Weighting: Each ETF included in the index receives a starting weight of 7.5%. ETFs that have a sales growth number in the top half of the ETFs included in the index receive an additional weight of 7.5%. The ETF with the highest sales growth receives an additional weight of 7.5%. The weight of any single ETF is capped at 25% and the remaining weights are distributed evenly among the remaining ETFs included in the index.
- Rebalance/Reconstitution: The selection stage (reconstitution) is conducted each August, while the weighting phase (rebalancing) occurs each February and August.
The index methodology is heavily based on Global X’s research and investment approach to thematic investing. One such consideration is optimizing around potential growth. By selecting themes based on their sales growth and overweighting those with the highest growth rates, the methodology seeks to gain exposure to the themes that seem to be experiencing rapid adoption, as their products and services are rapidly taking hold in the marketplace. Another consideration is diversification. By grouping themes by the sectors they are disrupting, and selecting one from each group, the methodology aims to achieve balance across the major forces that are driving disruption forward.
Conclusion
As technological advancements, demographic changes, and environmental factors drive disruption forward, investors are increasingly looking to position their portfolios in an attempt to capture these trends. By combining multiple themes into one ETF, tilting exposure to higher growth segments, and diversifying across the sectors impacted by such disruptions, GXTG seeks to provide investors with an efficient all-in-one thematic solution.
Related ETFs
GXTG: The Global X Thematic Growth ETF seeks to provide broad exposure to structurally disruptive macro-trends through a portfolio of ETFs selected from the Global X Thematic Growth family.