This pocket of technology is best defined as fast computers that solve complex problems by using principles of quantum mechanics, according to Defiance’s founder and CEO Matt Bielski. It’s a segment that’s about computer speed, machine learning and fast data digestion.
QTUM, listed on the NYSE Arca, owns about 60 companies that are either helping develop quantum technology, or are involved with machine learning technology, or are in the business of artificial intelligence and big data management. The fund carries a 0.65% expense ratio.
Some of the names included in the portfolio are Lockheed Martin (LMT), International Business Machines Corp. (IBM), Applied Materials (AMAT) and Attunity (ATTU)—the last, a company with market cap of about $400 million that’s up more than 160% year-to-date. These holdings are equally weighted, so investors get as much exposure to giants like Lockheed and IBM as they do to the likes of Attunity.
Some of these names can be found in broader funds, but not with much overlap. QTUM and the Invesco QQQ Trust (QQQ), for instance, only have a 20% overlap in holdings.
‘ARK’s Passive Cousin’
“I’d look at these as companies in the forefront of technology, who are developing the tech behind quantum computing and machine learning,” Bielski said. “If you’d asked my grandfather what tech is, it’s QQQ. To me, it’s quantum computing, augmented reality, big data, AI.”
QTUM can be used as a complement to a broader tech allocation, according to Bielski, much like Defiance ETFs’ other strategy, the Defiance Future Tech ETF (AUGR), launched last month. He said that implementation of QTUM would be much like that for ETFs from issuers such as ARK Funds, which is known for a similar focus on disruptive tech. (ARK’s main ETFs include the $1.4 billion ARK Innovation ETF (ARKK) and the $697 million ARK Web x.0 ETF (ARKW).)
The main difference between Defiance ETFs and ARK’s approach to capturing disruptive tech is that the first is a believer in passive management, whereas the latter is an active manager. Defiance ETFs are linked to BlueStar indexes. “You can think of us as ARK’s passive cousin,” Bielski said.
Defiance ETFs was founded by Bielski, whose career includes time at ETF issuers like ProShares, BlackRock’s iShares and Direxion. The firm is primarily focused on the disruptive technology space.
Contact Cinthia Murphy at [email protected]