ETF of the Week: Global X Education ETF (EDUT) | ETF Trends

ETF Trends CEO Tom Lydon discussed the Global X Education ETF (EDUT) on this week’s “ETF of the Week” podcast with Chuck Jaffe on the MoneyLife Show.

EDUT provides a unique take on equities with high exposure to the education theme. Companies that facilitate digital learning, educational content publishing for education at all levels around the world fall under this theme. EDUT undertakes extensive research to identify education companies based on industry reports, investment research, and consumer data. Revenue-based company analysis is conducted to identify pure-play companies with greater than 50% revenues derived from facilitating education.

EDUT is a new ETF launch designed to capture the ongoing shift toward a more digital age. Coronavirus shutdowns have caused many activities from work, entertainment, and education to shift to a home environment. This new ETF provides exposure to those engaged in online learning and publishing educational content, as well as those involved in early childhood education, higher education, and professional education. Access evolving trends in how education is delivered and how workers access skills needed for the jobs of the future.

How is Education Evolving?

The Institute for the Future estimates that 85% of the jobs today’s students will have in 2030 don’t exist yet. People will need to invest in education to help children meet the challenging job market of tomorrow. The surging value of education in the workforce is driving strong growth across the global industry, with revenues expected to rise from $6T in 2020 to $10T in 2030.

Online learning can give parents and working individuals the ability to attend classes while keeping their schedules flexible. In the U.S., where geographical constraints for education are minimal, 34.7% of those enrolled at higher education institutions engaged in some type of distance learning in 2019, up from 26.4% in 2013.

Covid-19 has revealed a short-term catalyst in a long-term trend toward digital education. One can look to COVID-induced school closings for the most immediate use cause. Cloud-based video conferencing software became virtual classrooms as a result. Now, online learning applications became curriculums and textbooks. Digital learning platforms became teacher’s assistants and has helped teachers organize and deliver coursework while giving students a place to interact.

According to an EY-Parthenon survey conducted at the height of the pandemic, 70% of students reported using third-party technology solutions to continue their education at home. So how does this show a growth opportunity in the future of education technology or EdTech?

Well, as demand for education surges around the world, old and deeply-entrenched institutions are failing to meet the challenge. Many government-run schools fail to meet basic education requirements, while private institutions demand exorbitant tuitions that limit access to wealthy families.

Related: ETF of the Week: Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR) 

From 2010 to 2019, the average undergraduate’s tuition in the U.S. rose 17%, reaching $35,800, while median weekly wages only grew 5% in that time. Fortunately, novel approaches to delivering educational resources can improve access by lowering education’s cost barriers. Virtual classrooms and much of the technology described remove the costly physical aspects of some education mediums.

According to the College Board, the average U.S. college student spends approximately $1,200 on books and supplies per academic year. Online textbook rental service, Chegg, claims to help lessen these costs, saving students who rent through them up to 90%. Digital book publishers can also help lower costs for students.

Beyond quality and cost, traditional schools often still miss the mark by failing to equip students with skills that apply to their future careers. Shortcomings create opportunities for for-profit companies to offer improved and/or supplementary education services by fulfilling unmet demand, introducing unique business models, and leveraging technology to reduce costs and broaden access.

Education-as-a-Service (EaaS) seeks to provide affordable, modular classes for those who may not want to enroll in a holistic program. And Artificial Intelligence (AI) can leverage machine learning to understand students’ individual needs, then designing and adapting curriculums to meet them.

There’s also technology like augmented and virtual reality (AR/VR), and educational video games hold similar transformative potential. AR/VR can bring students “outside” of their classrooms or remote learning environments to experience events as if they were happening in front of them.

EDUT includes exposure to significant business operations in at least one of five categories: educational content and publishing; digital learning platforms; early childhood education; secondary, higher or professional education; and enterprise video and chat communication platforms. All of these areas are informed by the current state of living.

Listen to the full podcast episode on EDUT ETF:

For more podcast episodes featuring Tom Lydon, visit our podcasts category.