ETF Research Analyst

Space ETF race heats up with two new European launches. Global X and First Trust have launched rival space-focused ETFs in Europe, adding to a rapidly expanding range of funds targeting the commercialisation of the space economy. The Global X Space Tech UCITS ETF and First Trust Bloomberg Space Economy UCITS ETF both began trading on 30 July, giving European investors new ways to gain exposure to businesses involved in satellites, rocket launches, space infrastructure and related technologies. The launches came less than two months after BlackRock and WisdomTree introduced their own European space ETFs, underlining how quickly the theme has become one of the more competitive areas of thematic product development. The Global X Space Tech UCITS ETF trades under the ticker LUNR on the London Stock Exchange and Deutsche Börse Xetra and has a total expense ratio of 0.50%. It tracks the Mirae Asset Space Tech UCITS Index. The index covers four areas: rocket launches and reusable rockets, space technology and components, satellite communications and data services, and space transportation, tourism and exploration. New constituents must generate at least 50% of their revenues from qualifying space-related activities, while existing constituents can remain eligible with at least 40%. The rules are designed to limit exposure to diversified industrial and defence companies for which space represents only a small part of their overall business. The First Trust Bloomberg Space Economy UCITS ETF has listed on the London Stock Exchange and Borsa Italiana with a total expense ratio of 0.65%. Its US dollar listing trades under the ticker FSPC, while its sterling listing uses LUNA. The ETF tracks the Bloomberg Space Economy Index, which selects up to 50 companies from the Bloomberg Intelligence Space Basket. Eligible businesses are divided into Gold and Silver tiers. Gold-ranked companies can account for up to 4.5% of the portfolio, while Silver-ranked constituents are capped at 3%. The index is rebalanced quarterly. First Trust said falling launch costs and advances in reusable rocket technology had permanently changed the economics of the space industry, creating opportunities across satellite technology, security, data and infrastructure. The theme does however remain small. BlackRock's iShares Space Technologies UCITS ETF had grown to around $25m by mid-August, while WisdomTree's fund had attracted roughly $11m. David Batchelor, senior analyst at QuotedData, said: "These two launches shows how quickly ETF providers are responding to growing interest in the commercial space industry, but investors should be careful not to assume that all space ETFs offer the same exposure. The underlying theme is wide, spanning reusable rockets, satellites, communications, defence, data and infrastructure, and the way an index defines the space economy can have a major impact on the resulting portfolio. The differences between funds in the sector are already visible in their portfolios. As of 14 August, Global X's new fund held 37 stocks, with SpaceX accounting for around 15% of assets, followed by AST SpaceMobile and Rocket Lab. By comparison, SpaceX represented around 10% of WisdomTree's rival Space Economy UCITS ETF. That makes the index methodology particularly important. Revenue thresholds, position limits and the treatment of diversified aerospace and defence companies can matter just as much as the headline fee".

Global X broadens global equity access with new SMID ETF. The ETF provider has launched a low-cost SMID ETF as investors seek broader global diversification beyond mega-cap stocks. Reading Time: 3 mins read Global X ETFs has launched a new ETF targeting international small and mid-cap companies, responding to growing investor demand for broader global equity diversification beyond mega-cap stocks. The Global X MSCI International Small and Mid Cap ETF (ISMD) provides exposure to around 300 companies across developed markets outside Australia by tracking the MSCI World ex Australia SMID Cap Select Index. The launch comes as global equity markets have become increasingly concentrated in a small number of the world's largest companies, with investors looking beyond traditional large-cap exposures to diversify portfolios and access a wider range of investment opportunities. Global X said the ETF combines small and mid-cap companies in a single portfolio, allowing investors to gain exposure to businesses earlier in their growth journey while remaining invested as they mature into larger companies. Global X chief executive Alex Zaika said many Australian investors already hold significant exposure to the world's largest companies through broad global equity funds, creating demand for complementary strategies. "Many Australian investors already have meaningful exposure to the world's largest companies through broad global equity funds. ISMD complements those portfolios by providing access to a part of the market that has historically been underrepresented, despite being home to many of tomorrow's market leaders," Zaika said. "As investors increasingly look to build resilient, diversified portfolios, we're continuing to expand our product suite with innovative, cost-effective solutions that provide access to areas of the market that have traditionally been difficult to access through index investing." MSCI head of Asia Pacific Shane Edwards said investor interest was increasingly shifting towards opportunities beyond large-cap equities. "We are pleased to bring MSCI's index design capabilities to this initiative at a time when investors are increasingly looking beyond large-cap equities for sources of diversification. Our index supports Global X in offering investors exposure to small and mid-cap companies across international developed markets, a segment that represents a significant share of the global equity opportunity set." Global X senior product and investment strategist Marc Jocum said the characteristics of the global SMID market had changed considerably in recent years. "The investment case for global SMIDs has evolved considerably. While these companies continue to offer attractive growth potential, we're also seeing stronger balance sheets, improving profitability and more attractive valuations relative to large-cap equities," Jocum said. "Importantly, combining small and mid-caps cohesively allows investors to remain invested as businesses grow through different stages of their lifecycle, rather than selling successful companies as they graduate out of traditional small-cap indices. "At a time when market leadership has become increasingly concentrated, ISMD provides investors with diversified exposure to businesses that could become the next generation of global leaders." Historically, Global X said global SMID investing has been dominated by active managers. ISMD instead offers a low-cost, transparent, rules-based index approach through a single ASX-listed ETF. The ETF carries a management fee of 0.45 per cent per annum and holds approximately 300 global small and mid-cap companies.

Global X launches BDRs of rare earth and AI ETFs on B3. Global X ETFs is expanding its product offering with the launch of two new ETF BDRs. Starting July 17, Brazilian investors will be able to trade EART39, focused on companies linked to rare earths and critical materials, and CHPX39, which brings together companies from the semiconductors, artificial intelligence (AI) infrastructure, and quantum computing segments. ETF BDRs are certificates traded on B3 that represent shares of index funds listed on foreign exchanges. They allow Brazilian investors to access international strategies and markets through the Brazilian exchange, without needing to open an account with a foreign broker or operate directly on other markets. The launch comes at a time of growing demand for technologies and inputs considered essential for industrial development. The expansion of electric vehicles, energy storage systems, and data center infrastructure has driven demand for minerals such as lithium, copper, nickel, and rare earths, while the advancement of generative artificial intelligence has boosted investments in high-performance semiconductors and computational infrastructure. EART39 seeks exposure to the critical materials market. EART39 replicates the Solactive Rare Earth and Critical Materials Index, an index composed of global companies involved in the exploration, mining, production, and refining of critical materials used in various technologies. In addition to rare earths, the index includes companies linked to minerals such as lithium, copper, nickel, cobalt, manganese, graphite, graphene, palladium, platinum, and carbon-based materials. The methodology prioritizes companies classified as Pure Play, which derive at least 50% of revenue from activities related to the segment, as well as pre-revenue stage companies and diversified companies with relevant exposure to the sector. According to the manager, the goal is to offer exposure to the structural growth in demand for inputs needed for electrification, energy storage, digitalization, and industrial development. The index is rebalanced semiannually in April and October, and the management fee is 0.59% per year. CHPX39 brings together companies linked to AI infrastructure. The CHPX39 replicates the Global X AI Semiconductor & Quantum Index, formed by companies that directly participate in the global value chain of artificial intelligence, semiconductors, and quantum computing. The index includes companies involved in the development of GPUs, CPUs, ASICs, memory chips, AI-focused computing systems, data center infrastructure, and quantum computing technologies. The portfolio is organized around four main fronts: semiconductors for artificial intelligence, advanced computing systems, data center infrastructure, and quantum computing. Like EART39, the methodology favors Pure Play companies, where most of the revenue is related to these segments. Rebalancing occurs twice a year, in May and November, and the management fee is 0.50% per year. "With EART39 and CHPX39, we expand Brazilian investors' access to two structural trends directly connected to global technological transformation. On one hand, critical materials that support the energy transition and digitalization of the economy. On the other, the companies responsible for the computational infrastructure needed for the advancement of artificial intelligence and quantum computing," says Flávio Vegas, product specialist at Global X. Products are geared toward long-term strategies. According to the manager, the two BDRs were developed for investors seeking exposure to long-term structural trends through a diversified portfolio of international companies. The products will be traded daily on B3 and can be acquired through banks and brokerages. Both have a contracted market maker to provide liquidity during the trading session. As with other equity investments, ETFs are subject to market risks, currency fluctuations, and volatility in the sectors in which they invest. Because they concentrate exposure in specific segments of the economy, they may experience greater fluctuations than those observed in broad stock market indices.