Kanish Chugh
ETF Securities’ ETFS Morningstar Global Technology ETF (ASX Code: TECH) has been upgraded to ‘Highly Recommended’ by Lonsec.
Lonsec says the fund is an efficient way for investors to gain exposure to the developed markets information technology sector, which is under-represented in the Australian equity market.
It says TECH’s underlying index selection process is managed by a large and experienced equity research team with a disciplined process. The fund tracks the Morningstar Developed Markets Technology Moat Focus Index, with stock selections based on Morningstar’s research.
This structure – a rules-based equal weighted global equity index – combines elements of passive and active investing, which Lonsec says is offered at “a competitive management fee relative to similar global equity technology thematic ETFs.”
TECH has a concentrated portfolio of 25 to 50 stocks (currently 34), with top holdings including US cyber security company Palo Alto Networks, Israeli data security and surveillance company Nice Ltd, French-Italian electronics manufacturer STMicroelectronics NV, Japanese electronics manufacturer Murata Manufacturing Co and US cloud enterprise solutions provider ServiceNow Inc.
It has produced an average return of 26.8% a year since inception in April 2017 after adjusting for costs and fees. While the MSCI World Index has grown by 14.5% a year over the same period. Over the 12 months to the end of September, the fund returned 32.5%, compared with 27.8% for the MSCI.
ETF Securities Head of Distribution Kanish Chugh says: “These returns are driven by Morningstar’s focus on attractive pricing relative to fair value and sustainable growth.”
“We have seen a growing usage of TECH in portfolios as a proxy for accessing some of the thematics like cloud and semiconductors for a diversified play. This ETF offers a a semi-active approach which has an obvious appeal for investors. The increased demand for TECH has also been driven by investment professionals who are adding this ETF in their model portfolios,” Chugh says.
As at 21st October 2021, TECH reported Year To Date inflows of $114.3 million.
Lonsec says Morningstar’s MOAT process is a well-known investment strategy that has delivered strong investment performance. It is based on “analytical rigour delivered in a consistent manner”, aimed at identifying companies with a sustainable competitive advantage.
The research house says ETF Securities is a pioneer in specialist ETF investments, with the depth to manage and structure ETFs effectively and a proven track record of successfully running index strategies.