A significant part of new economy investment trends, also known as the fourth industrial revolution, are alternative and clean energy ideas. Some exchange traded funds tap into that theme, including the newly minted SPDR Kensho Clean Power ETF (NYSEArca: XKCP).
XKCP debuted last month alongside the SPDR Kensho New Economies Composite ETF (NYSEArca: KOMP) and the SPDR Kensho Final Frontiers ETF (NYSEArca: XKFF).
The new ETFs, which track proprietary index methodologies developed by Kensho Technologies, an award-winning machine intelligence company, are designed to provide investors with cost efficient, diversified access to the potential growth of innovative companies widely considered to be driving the Fourth Industrial Revolution and ushering in the new economy.
XKCP seeks to provide exposure to the clean power industry both in terms of generation and the underlying technology driving it. Alternative energy sources are an increasingly important part of the power generation conversation.
The Energy Information Administration (EIA) “expects renewable energy to be the fastest growing energy source between now and 2040, recording a growth rate of 2.3% per year,” according to State Street.
Inside XKCP ETF
XKCP targets the Kensho Clean Power Index and holds 44 stocks. The ETF’s top 10 holdings combine for over 41% of its weight. That group includes shares of Tesla Inc. (NASDAQ: TSLA), the electric vehicle maker. Investments in clean energy projects are rising, potentially providing a long-term tailwind for ETFs like XKCP.
“As a result, dollars are flowing into the renewable energy space. In 2017, $330.5 billion was invested in clean energy, just shy of the record investment seen in 2015,” said State Street.
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Fifteen industry groups are represented in XKCP with the dominant sector exposures being utilities and technology. Declining costs, which are making clean energy sources cost-effective relative to some fossil fuels, also bode well for the industry.
“In turn, costs are falling. For instance, utility-scale solar costs dropped by 25% over just two years, making solar energy increasingly competitive with traditional inputs like coal,” said State Street. “These trends are spurring market growth.”
XKCP’s annual fee is 0.45%, or $45 on a $10,000 investment.
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