Daily ETF Watch: Niche Tech Funds Debut

PureFunds once again launches some first-to-market tech ETFs.

Reviewed by: Heather Bell
Edited by: Heather Bell
PureFunds, which had a surprise hit on its hands when it launched the PureFunds ISE Cyber Security ETF (HACK | C-32) in 2014, has once again targeted two niche segments of the technology sector with its latest launches. The PureFunds Drone Economy Strategy ETF (IFLY) and the PureFunds Video Game Tech ETF (GAMR) are both first-to-market products that are listed on the NYSE Arca.

IFLY tracks the Reality Shares Drone Index and comes with an expense ratio of 0.75%. The underlying benchmark includes companies from around the world that are not only involved in the development and manufacture of drone technology but also those that use drone technology. The methodology classifies the former group as “Drone Economy Suppliers” and the latter as “Drone Economy Drivers,” according to the prospectus.

The higher the amount of revenue a company generates from its drone industry involvement and the higher its expected growth rate, the higher its weighting in the index. Drivers are slotted to represent 50% to 95% of the underlying index, while suppliers’ aggregate weight will be between 5% and 50%. The index must have a minimum of 20 components, but has no upper limit.

GAMR takes a similar tiered approach. Its scope includes companies that provide the software and hardware for the video gaming industry, which includes the entertainment, educational software and virtual reality spaces. The index also covers companies less directly related to the industry, such as those that are not pure plays on the space but that provide intellectual property to the industry, as well as large conglomerates that support it through their business models, the prospectus said.

Together, the pure-play and nonpure-play groups are reset to represent 90% of the total index weight at each rebalancing, while the large conglomerate companies are reset to a 10% weighting. Components within each of the two groups are equally weighted.

The prospectus noted that GAMR had 36 components as of mid-February, including 20 non-U.S. companies.

Like IFLY, GAMR comes with an expense ratio of 0.75%.

Contact Heather Bell at [email protected].

Heather Bell is a former managing editor of etf.com. She has also held editorial positions at Dow Jones Indexes and Lehman Brothers. Bell is a graduate of Dartmouth college and resides in the Denver area with her two dogs.