DWS' Xtrackers Unit Launches Thematic Tech ETF

Xtrackers, an ETF segment of European asset manager DWS Group, launched a new exchange-traded thematic tech fund that employs careful screening to filter out companies deemed risky because of geopolitical and strategic concerns, the firm announced on Nov. 16.  
 
The Xtrackers US National Critical Technologies ETF (CRTC) tracks an index of mid- and large-cap companies involved in one of the 14 technologies deemed critical by the U.S. Department of Defense, including artificial intelligence and automation, renewable energy, biotechnology and space technology. 

The new listing comes in the wake of U.S. President Joe Biden and Chinese President Xi Jinping’s meeting last week to discuss simmering tensions between China and the U.S. Talk of U.S. technology export restrictions—which Xi referred to as “technological containment”— highlighted the significance of such geostrategic risks. 

CRTC’s Criteria 

Sifting out companies considered to be too high of an exposure risk—meaning they are at risk of being disrupted by economic sanctions, regulatory actions or other governmental policies aimed at rival countries—is one of CRTC’s selling points.  
 
“To my knowledge, no other ETF, or at least no other thematic ETF, screens companies for their potential geostrategic risks,” said Arne Noack, head of Systematic investment Solutions for the Americas at DWS  
 
The screening method should provide a “smoother ride” with less volatility than comparable tech-based thematic exchange-traded funds, Noack added. 

Apple Excluded

Apple Inc. is perhaps the most prominent example of a company shunned by CRTC’s process. The tech giant has many Chinese suppliers and Russia-exposed joint ventures, factors that contributed to it slipping just below the cutoff for inclusion in the fund, Noack said.  

Other companies, such as pharmaceutical titan Eli Lilly and Co. and electric-vehicle maker Tesla Inc. were also blocked from joining the ETF, despite their deep involvement with one of the 14 required technologies. 
 
The fund, which has an expense ratio of 0.35%, is part of DWS’ broader rollout of thematic ETFs, the first three of which launched earlier this year.  

According to Noack, DWS plans to roll out several more thematic funds over the next year.  
 
Contact Gabe Alpert at [email protected]