The Global X FinTech ETF (FINX) might not be the first ETF you think of when you think about investing in global technology. It’s still relatively small, relatively young and relatively narrow in focus in a segment that has more than a dozen global technology ETFs competing for investor assets.
Yet FINX is delivering stellar returns this year, outperforming some of its competitors, including the segment leader iShares Global Tech ETF (IXN); the buzzed-about ETFMG Prime Mobile Payments ETF (IPAY); the competing First Trust NASDAQ Cybersecurity ETF (CIBR) and even the iShares Exponential Technologies ETF (XT), which came to market with names like Ric Edelman behind it.
Year-to-date, FINX has gained more than twice as much as the $2.4 billion IXN, and it’s some 20 percentage points ahead of XT:
Chart courtesy of StockCharts.com
Not Really Apples To Apples
In fairness, none of these ETFs is quite alike, which makes a performance comparison only really useful to illustrate that global technology portfolios come in many flavors. This is a segment peppered with thematic ETFs, and that means return dispersion is a given in this space.
Consider their broad differences:
- FINX focuses on the fintech industry—a broad segment that includes subthemes like mobile payments, blockchain and even robo investment services. More than half the portfolio is tied to software and IT service companies, led by names like Wirecard, Temenos, Square Inc. and Fiserv.
- IPAY, meanwhile, focuses exclusively on the mobile payments industry, allocating most to companies like Visa, American Express, MasterCard and PayPal.
- CIBR looks for companies involved with cybersecurity, such as VMware, Cisco Systems, Palo Alto Networks and Splunk.
- XT looks for “exponential tech” such as big data and robotics, among other things. Names here include Swedish Orphan Biovitrum, 3D Systems, Advanced Micro Devices, Infosys and Netflix.
- IXN, which is a market-cap-weighted strategy tracking the S&P Global 1200 Information Technology Sector Index, holds among its top portfolio classic tech giants like Apple, Microsoft, Facebook and Alphabet.
Five global tech portfolios, little overlap in top holdings, according to our ETF stock finder tool. Still, what unites them is that they all swim in the same global tech pond, each vying for investor dollars allocated to tech stocks globally. And to that end, it’s FINX that’s ahead this year.
Behind The Portfolio
Beyond focus differences, notable here is the fact that FINX’s portfolio, with 38 holdings in all, has a weighted average market cap of only $18 billion. These are much smaller companies, on average, than what you’d find in a portfolio like IXN where that portfolio-weighted average market cap sits at $369 billion.
FINX’s average market cap is also smaller than that of IPAY, CIBR and XT. And that could be helping the fund this year, as smaller-cap names have largely done better than large-cap stocks.
Another unique trait of the fund relative to its peers is that FINX tracks an INDXX index of companies in developed markets only. It excludes emerging market exposure, whereas the other ETFs all own or may own emerging market stocks as well. So far in 2018, that’s a segment that hasn’t done all that well.
Year-to-date, FINX has attracted a net of $238 million in net creations, and now it’s a $316 million ETF just two years since launch. What’s more, FINX has seen only one day of outflows so far in 2018, according to FactSet data.
Asset flows data also show that FINX may be doing well with investors, but it isn’t the only global tech ETF raking in fresh net dollars. All five funds here have seen solid net inflows year-to-date, with segment leader IXN taking in $841 million—it’s now a $2.4 billion fund.
Global technology ETFs aren’t generally cheap, but here too there’s dispersion, and FINX isn’t one of the cheapest.
IXN, one of the lowest-cost funds in this segment, has a 0.47% expense ratio, or $47 per $10,000 invested. The same goes for XT, also at 0.47%.
FINX costs 0.68%—that’s $21 more per $10,000 invested than IXN or XT. Yes, it’s cheaper than competing IPAY at 0.80%, but it’s also pricier than CIBR, at 0.60% in fees.
At the end of the day, the fund isn’t an outlier one way or the other when it comes to price, but in this era of cost awareness, it’s always good to point out that fees matter over time. The more you pay, the less you keep in your pocket.
Contact Cinthia Murphy at [email protected]