The O’Shares Global Internet Giants ETF (NYSEArca: OGIG) is one of the newer options among Internet exchange traded funds, but a combination of favorable fees and diverse geographic exposure make it a compelling option in the crowded field of Internet ETFs.
Some of OGIG’s top portfolio holdings includes companies such as Alibaba, Amazon, Facebook, and Alphabet, each of which represents 6- to 6.5-percent of the overall portfolio. Also amongst the index’s 52 holdings are Chinese tech companies like YY, Baidu, 58, and JD. For long-term investors, OGIG’s exposure to ex-US e-commerce and Internet companies is relevant and important
“Developed countries are nearing Internet adoption saturation. North America and Europe account for roughly 15% of the world’s population and are nearing full adoption at 95% and 85%, respectively,” according to O’Shares research. “Asia and Africa, on the other hand, have populations exceeding 4 billion and 1 billion, respectively, accounting for over 70% of the world’s population but have much lower adoption rates. Only half of Asia is online and that proportion drops to nearly a third for Africa. As Internet adoption rates in Asia and Africa converge with developed markets, growth in Internet and e-commerce will likely follow suit.”
E-Commerce As A Driver
Not surprisingly, e-commerce is a major driver of long-term potential for OGIG and rival Internet ETFs. OGIG’s structure provides ample leverage to compelling domestic and international e-commerce trends.
“Global E-commerce is experiencing robust growth,” according to O’Share. “Sales totaled ~$2.3 trillion in 2017 and are forecasted to reach ~$4.8 trillion by 2021, representing a growth rate of ~112%.The U.S. accounted for an estimated 19% of the market in 2017, with China and Rest of World at an estimated 48% and 33%, respectively.”
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Of course, China is a major player in a the global e-commerce market, but many traditional Internet ETFs do not feature China exposure. OGIG does.
“The rapid adoption of e-commerce in China has helped fuel regional dominance from Asia-Pacific. In 2010, Asia- Pacific accounted for only a third of total e-commerce. As of last year, that proportion had grown to 60%. North America and Europe comprised a total of 36%, at 21% and 15%, respectively. By 2021, Asia-Pacific’s share of global e-commerce is projected to grow to 67%,” according to O’Shares.
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