Today, we’ll explore the exchange-traded funds tracking the fintech industry as one of the most promising investment options
Investing all your spare money in a single company may be risky and less profitable than having a diversified portfolio. Therefore, many people prefer to invest in funds that aggregate a number of traded securities. Another bonus is that such funds are managed by professionals and you don’t need to study trading charts all day long.
Unlike mutual funds, ETFs are bought and sold with constant price changes throughout the trading day. They are cost-effective, liquid, have low commission fees, and are more immune to market volatility since they do not involve direct ownership of certain securities. Many ETFs focus on the specific industry or economic segment.
ARKF (ARK Fintech Innovation ETF)
ARK Investment Management positions itself as a firm that focuses on investment solutions promising long-term growth. The company typically invests in stocks it projects to double in value over a five-year period. A relatively new player in money management, ARK has achieved tremendous success with its investment returns for only two years of existence. Thus, investors of all types brought Cathie Wood’s company nearly $6.8 billion new assets last December.
ARKF tracks mobile payments, digital wallets, peer-to-peer lending, frictionless funding platforms, blockchain technology, and risk transformation. Its Net Asset Value is currently $52.52. It grew almost 72% over 1 year and 52% since inception. The top holdings of this ETF include Square, Shopify, Coinbase, PayPal, Mercadolibre, and Adyen.
FINX (Global X Fintech ETF)
Global X ETFs was founded in 2008. In 2018, the company was acquired by Mirae Asset Financial Group, a Seoul-based global financial services provider, with over $560 billion in assets under management worldwide. Global X has approximately $35 billion in managed assets, across more than 80 different products. These include thematic growth funds, income-focused funds, international, commodities, core, and alpha funds. The Global X FinTech ETF was up over 50% last year, promising investors a high growth potential.
FINX is based on the Indxx Global FinTech Thematic Index designed to track the performance of fintech companies listed in developed markets which are disrupting existing business models. This ETF features 54 holdings with top performers like Adyen, Square, Intuit, Fiserv, PayPal, Fidelity, Coinbase, and Afterpay. The NAV performance since inception may be just 27%, however, its growth over 1 year surpassed 44%, while in the last month the fund added up 5.7%. Major investments of the FINX ETF are aimed at packaged fintech software, IT services and data processing services.
IPAY (ETFMG Prime Mobile Payments ETF)
ETFMG specialises in turning portfolio management and investment strategies into successful actively managed ETFs. It was founded in 2014 by a Wall Street veteran Sam Masucci, with a vision of developing innovative thematic ETFs that provide unique exposure to new markets. Its Prime Mobile Payments ETF is dedicated to the narrow niche segment of mobile payments. At the same time, this segment is growing at a CAGR of 25-30%, by different estimations.
IPAY tracks an index of global equity in credit card firms, and companies providing payment infrastructure, payment services, payment processing and payment solutions. These include Visa, Square, PayPal, Mastercard, American Express, Fidelity, and more. The fund invests at least 80% of its total assets in the component securities of the benchmark Prime Mobile Payments Index and in ADRs and GDRs based on the component securities in the index. Currently, the ETF has $1.26 billion in assets under management. Its cumulative performance since inception is over 185% with 5% growth during 1 year. However, the annualised 1-year performance is 43.68%.
TPAY (Ecofin Digital Payments Infrastructure Fund)
The ETF is managed by TortoiseEcofin that brings together expertise investing across the energy value chain as well as ecology and finance. In late 2020, Tortoise, which had previously acquired Ecofin Limited, announced that it rebranded all its sustainable-focused investing strategies to Ecofin. Its Digital Payments Infrastructure Fund was one of the rebranded securities since digital payments support sustainable economic growth across the globe. The company aims to provide investors with both attractive long-term risk-adjusted returns and a measurable impact.
TPAY uses a passive management approach and tracks the total return performance of the Ecofin Global Digital Payments Infrastructure Index. It invests in the new forms of digital payments, such as mobile, point-of-sale devices and P2P matching engines. The fund’s net assets exceed $14 billion. Its annual total return in 2020 was 40.95%. TPAY’s major holdings include Afterpay, PayPal, Discover, American Express, Square, Adyen, Mastercard, FleetCor, DocuSign, Visa, and others. There’s no strong accent on a few industry leaders. The fund places about 4-5% of its investment assets in each of the top 15 tracked companies.
KOIN (Capital Link Global Fintech Leaders ETF)
Capital Link International is a Hong Kong holding company that has built the world’s first institutionally linked China platform by aligning three wholly-owned business units – Media, Indices and Asset Management. CLI’s index model integrates machine learning expertise with data enrichment to allow its Asia-facing stable of NYSE ETFs to be systematically monitored, transparently audited and rapidly updated. The stock for the Indices are selected according to the natural language processing algorithm. In 2021, CLI will launch the updated fintech ETF on the NYSE. Despite some alterations in the benchmark index, the ETF still largely revolves around blockchain-related businesses. Koin aims to invest in companies that both create the blockchain solutions and popularise them.
Previously known as Capital Link NextGen Protocol ETF, the fund is going to change the name to Capital Link Global Fintech Leaders ETF. The tracked index changes from the ATFI Global NextGen Fintech Index to the ATFI Global Fintech Leaders Index. In addition, the company may invest up to 20% outside the index. Its major holdings include Baidu, Intel, Nvidia, Oracle, Cisco, Taiwan Semiconductor, PayPal, Microsoft, Salesforce, and even Nestlé. The presence of the latter may seem odd on the fintech list, but the food retail giant joined the IBM Food Trust as a founding member in 2017 and has expanded blockchain use for its supply chain ever since. Besides, the ETF invests in payment giants like Visa, Mastercard, and Amazon.
The fund performance as of Q1 2021 was 63% over 1 year and 16% since inception. At the same time, March 2021 brought no growth to the ETF which may have caused the strategic change of the company’s investments. Currently, KOIN boasts almost 44% in trailing total 1-year return and almost 17% of YTD daily total return. Capital Link Global Fintech Leaders ETF also has an MSCI ESG Fund Rating of AA based on a score of 7.73 out of 10. It means the ETF shows strong and/or improving management of financially relevant environmental, social and governance issues.