Translating Intangible Assets into an Outperforming ETF Strategy

A company’s intangible assets help provide a strong competitive advantage over other businesses, and one exchange traded fund strategy has honed in on this attribute to help investors get a leg up on the market.

“Although not always easy to quantify, intangible assets are one of the primary sources of strong competitive advantages for businesses and a key source of economic moats,” Brandon Rakszawski, ETF Product Manager for VanEck, said in a research note. “Intangible assets can include corporate intellectual property, such as patents, trademarks, copyrights, government licenses, and business methodologies. Intangible assets help companies to safeguard key competitive advantages…. A company’s reputation, often measured by goodwill and brand recognition, is also considered an intangible asset.”

According to Morningstar equity research, 60% of its domestic and international moat-rated companies have achieved a “wide economic moat” designation because of intangible assets.

“Patents, brands, regulatory licenses, and other intangible assets can prevent competitors from duplicating a company’s products, or allow the company to charge a significant price premium,” according to Morningstar.

To better illustrate the benefits of intangibles, Rakszawski pointed to so-called wide moat companies like Bristol-Myers Squibb and Lowe’s Companies.