How ALPS’ Disruptive Technologies ETF Compares to XLK

SS&C ALPS Advisors’ disruptive technologies ETF provides notably different exposure than a broad tech sector fund.

The differences in composition between ALPS’ fund versus the broad benchmark could be seen in last month’s performance. The ALPS Disruptive Technologies ETF (DTEC) climbed 15.80% in November, while the Technology Select Sector SPDR ETF (XLK) gained 10.75%

See more: “ALPS’ Disruptive Technologies ETF Outpaced Broad Tech Sector in November

Whereas XLK aims to offer broad tech sector exposure, DTEC delivers exposure to companies using disruptive technologies. This includes companies that are entering traditional markets with new digital forms of production and distribution, that seek to disrupt an existing market and value network, displace established market-leading firms, products and alliances, and increasingly gain market share, according to ALPS.

DTEC focuses exposure on 10 disruptive technology themes. These include cybersecurity; mobile payments; data and analytics; fintech; robotics and artificial intelligence; internet of things; cloud computing; 3D printing; clean energy and smart grid; and healthcare innovation.

DTEC selects 10 companies from each theme according to a proprietary model and equally weights each security. This effectively gives each theme and each company equal representation.

How DTEC’s Portfolio Compares to XLK

DTEC’s equal-weight methodology results in more balanced exposure to the sector. This is particularly impactful in the tech sector, which is notorious for being highly concentrated in just a few mega-cap names.

The ETF holds 99 securities as of December 7, with just 12.9% of the fund by weight in the top 10 names. In comparison, XLK comprises 66 holdings, with 70.5% of the fund by weight in the top 10 names.

XLK focuses exposure on large-cap companies, whereas DTEC provides exposure down the cap spectrum. Large-cap names make up 62.5% of ALPS’ disruptive technologies ETF by weight, with 29.9% and 7.5% of the fund in mid- and small-cap names, respectively.

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