As technology advances, ETF investors can access targeted strategies to focus on new developing market sectors such as blockchain and autonomous vehicles.
For example, the Innovation Shares NextGen Protocol ETF (NYSEArca: KOIN) was the first ETF to incorporate an artificial intelligence-driven process to identify and invest in blockchain innovators and adopters.
KOIN tries to reflect the performance of the Innovation Labs Blockchain Innovators Index, which is comprised of companies that that use or are involved in the blockchain technology. The underlying Innovation Labs Blockchain Innovators Index has also been the best performing blockchain-related index year-to-date.
When American consumers think of blockchains, they would automatically tie it with bitcoins or cryptocurrencies. To be more precise, a blockchain is a decentralized database shared across all users that facilitates the process of recording transactions and tracking assets across a business network. The blockchain technology has many applications beyond cryptocurrencies. This foundational technology is expected to pave the way for significant disruptions across many industries.
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The blockchain-related ETF currently includes a hefty 55.5% tilt toward the technology sector, but it is also exposed to other market segments like financial services 24.6%, industrials 7.6%, consumer cyclical 6.6% and energy 4.2%.
“Technology is the largest sector now but it could change as blockchain evolves,” Matt Markiewicz, Managing Director with Innovation Shares, told ETF Trends in a call.
The ETF provides exposure to segments that one wouldn’t initially think of, such as Visa 7.0%, Tencent Holdings 6.2%, Amazon.com 6.0%, Taiwan Semiconductor 6.0% and BP 4.2%, among others. KOIN also has a 12% overlap with the benchmark Nasdaq-100 Index. The fund includes exposure to many prominent companies that are dabbling with the blockchain technology in hopes of implementing the tech to make their businesses more efficient.
These are big companies “that have a war chest to follow through with their initiatives and test how the technology can be used,” Markiewicz said. “It could be a pure play one day, but not now.”
Next-Gen Vehicles
Additionally, Innovation Shares offers the Innovation Shares NextGen Vehicles & Technology ETF (NYSEArca: EKAR), which incorporates the firm’s AI driven methodology to build a diverse portfolio of equities with exposure to the theme of electric & autonomous vehicles.
EKAR tries to reflect the performance of the Innovation Labs Next Generation Vehicles Index, which is comprised of companies engaged in the development of “New Energy Vehicles,” such as vehicles propelled by one or more electric motors powered by rechargeable battery packs, or “Autonomously Driven Vehicles,” such as vehicles capable of driving themselves from a starting point to a predetermined destination in “autopilot” mode using various in-vehicle technologies and sensors, according to a prospectus sheet.
Related: An ETF Focusing on the Next Generation of Automobiles
The next-gen car ETF can also help investors diversify away from a home country bias as the portfolio includes a 60% tilt toward international names.
“The theme of electrification and autonomy is a global theme,” Markiewicz added.
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