Best Of 2016: This Year's Most Innovative New ETFs

November 03, 2016

MPCTiShares MSCI Global Impact ETF
Another fund that focuses on environmental, social and governance (ESG) factors, MPCT was launched on Earth Day this year, with the ETF focusing on the companies that seek positive change, particularly on the environmental and social aspects of ESG.

To stand out in the growing ESG field, MPCT seeks to not only focus on a company's ESG performance, but to measure the impact of its work. The ETF is designed to track the newly created MSCI ACWI Sustainable Impact Index. Using the United Nations' Sustainable Development Goals as a guide, this index focuses on companies that get a majority of their revenue from products and services that address the environment and social challenges defined by the UN. Among some of those goals are energy efficiency, sustainable water, sanitation, nutrition and education.

MPCT holds true to firmly held ESG beliefs and avoids firms that have more than 10% of their sales from alcohol or tobacco, or that are involved in predatory lending.

This new MSCI ACWI Sustainable Impact Index has greater exposure to companies seeking to make a positive impact versus the MSCI ACWI Index, BlackRock says. Citing data from MSCI, the new index had 71% higher revenue exposure to sustainable impact solutions than companies in the MSCI ACWI Index in fiscal year 2014, particularly when looking at companies that provide basic needs, and those focused on mitigating climate change.

As a global fund, 40% of its holdings are in the U.S., about 30% in Europe and the rest in Asia. Industrials are its top sector, at 28%, and it's rebalanced annually.

PRNT3D Printing ETF
PRNT is the first ETF that seeks to capture the companies that focus on 3D printing, also known as additive manufacturing, which makes three-dimensional solid objects from a digital file.

There's a lot of excitement around 3D printing and the potential it has to disrupt manufacturing. ARK cites a McKinsey report forecasting the 3D printing market to grow from $4 billion in 2014 to between $180 billion and $490 billion by 2025. This fund debuted two years after 3D stocks saw a boom-and-bust cycle in 2014, with many of the smaller names now trading at a fraction of their 2014 highs, such as 3D Systems, Stratasys and Voxeljet. 

The ETF is based on the Total 3D-Printing Index from Solactive AG, which tracks price movements of stocks of companies involved in the 3D printing industry. Because there are only a handful of publicly traded companies that are purely in 3D printing, the index also includes related businesses.

ARK calls this a multifactor-weighted ETF, with equal weighting within each business sector. Three-D printing hardware has a 50% weighting, computer-aided design and 3D printing simulation software have a 30% weighting, 3D printing centers have a 13% weighting, while scanning and measurement is weighted at 5%, and at 2% is 3D printing materials.

Not surprisingly, the fund is heavily weighted in the information technology sector, at 53%. U.S. companies dominate the fund, at 69%, with European and Taiwan names making up the rest. The fund holds equities and depositary receipts of exchange-listed companies, and many of the names are small-cap firms.

MILNGlobal X Millennials Thematic ETF
MILN was the first ETF that looked to invest in firms that might benefit from the habits of U.S. millennials, a group of people born between 1980 and 2000, who are the largest living generation. A thematic ETF, the concept behind this fund posits because of millennials' sheer numbers, they can drive the business outcomes of certain companies based on their preferences, which are different from prior generations. Unsurprisingly, companies are eager to tap into that spending power.

MILN is based on the Indxx Millennials Thematic Index and has a broad focus of categories that may be of interest to millennials, including social media, entertainment, dining, apparel, health, travel, education, housing and financial services. While several of those categories are of interest to anyone, not just millennials, the idea of the fund is to zero in on that generation's supposed interest in eating out often, ordering online versus buying in stores and a focus on choosing healthier products.

The idea behind the ETF is that, as this generation ages—with the youngest being about 16—it can shape which companies outperform as millennials start to increase their earning power.

This isn't the only fund that focuses on millennials, as the Principal Millennials Index ETF (GENY) debuted in mid-August. But what makes MILN different is its focus solely on the U.S., whereas GENY includes some international companies.

Many of the firms MILN holds are well-known internet names, and most of the top 10 holdings are companies not much older than many millennials, with LinkedIn, Amazon, eBay and Facebook rounding out the top four. But what makes it more than just a technology fund is that just over 50% of the fund's weight is in consumer cyclicals, with technology at 31%.

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