For investors looking for a multitude of disruptive themes under the umbrella of a single ETF, the ALPS Disruptive Technologies ETF (CBOE: DTEC) is a fund that makes a lot of sense.
DTEC tracks the Indxx Disruptive Technologies Index, which identifies companies using disruptive technologies across ten thematic areas, including Healthcare Innovation, Internet of Things, Clean Energy and Smart Grid, Cloud Computing, Data and Analytics, FinTech, Robotics, and Artificial Intelligence, Cybersecurity, 3D Printing, and Mobile Payments.
That benchmark only features companies that derive a minimum of 50% of revenue from a single disruptive technology thematic area and the index provider will review the themes every three years for inclusion.
Companies using disruptive technologies are defined as those entering traditional markets with new digital forms of production and distribution, seek to disrupt an existing market and value network, displace established market-leading firms, products, and alliances and increasingly gain market share.
Why DTEC Matters
Fintech is one area DTEC has exposure and it could be impactful for the fund this year. Fintech allows financial firms to leverage cutting edge technology to reduce costs, improve decision making and risk controls, remove middlemen and enhance customer experiences. A thematic approach includes investments that stand to benefit from structural change driven by demographic and technological changes.
The payment processing space is seeing a growing number of big bets placed by venture capitalists, which could give financial technology ETFs a boost. It’s a $1.9 trillion industry that the largest tech firms are trying to tap into.
DTEC’s cloud exposure is also worth highlighting. Declining costs in cloud adoption and increasing ease of use are among the factors driving the cloud computing boom. Several of DTEC’s components have first-mover advantages in various cloud niches and are building attractive competitive moats in the space.
The cloud computing industry that was estimated to be worth $188 billion in 2018 is expected to be worth over $300 billion by 2022, a nearly 15% annualized growth rate.
Artificial intelligence (AI) is another prominent DTEC theme.
As technology continues to advance, it gives cybercriminals more tools to defraud consumers and in turn, companies are fighting back with artificial intelligence (AI). This gives disruptive-focused ETFs more prominence as AI sets out to fight the good fight.
DTEC charges 0.50% per year, or $50 on a $10,000 investment.
For more on disruptive technologies, visit our Disruptive Technology Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.