America’s technological lead on its geopolitical opponents is wearing thin.
Investors who want to ensure the free world stays ahead in the race for technological supremacy have a special custom-made exchange traded fund (ETF) to consider.
On November 7, DWS launched a the Xtrackers US National Critical Technologies ETF on the New York Stock Exchange, Arca under the symbol “CRTC”. The fund tracks large and midcap companies that develop critical emerging technologies for the U.S. and its allies.
Firms included in CRTC’s holdings must be involved in at least on of the 14 key tech areas the U.S. Department of Defense views as crucial to national security.
Some of these areas — such as hypersonics and directed energy weapons — are mostly for military use only, according to the DoD. However, many are being developed by private companies for enterprise or even consumer-facing applications. For instance, next-gen wireless communications, microelectronics, and human-machine interfaces.
Companies that fall within these fields are then assessed for their geostrategic risk, denoting a score for the relative to its exposure and for their geostrategic risk.
The fund “leverages a geostrategic risk rating that evaluates risks on different levels,” says Arne Noack, head of systematic investment strategies, Americas at DWS. “This will provide investors with exposure to sectors and companies aligned to technologies of strategic importance.”
Noack also noted that DWS designed the fund to “fortify… investments against certain geostrategic interdependencies.”
While CRTC’s heaviest-weighted components include Alphabet, Microsoft, Chevron, and other American giants, its holds a plethora of smaller holdings that reveal the international footprint of U.S. strategic map. This includes Australian and Canadian mining and telecommunication companies, as well as British aerospace firms and Japanese drug makers, and even a small number of New Zealand firms that control key regional assets, including Auckland International Airport Ltd.
With the rapid erosion of post–Cold War international order in recent years, geopolitical risk has once again become a crucial risk factor for investors.
Jay Powell, the Fed chair, warned last month that geopolitical tensions “pose important risks to global economic activity” and carry “highly uncertain” implications.
There is a growing appetite among multinationals for geopolitical risk services, giving boutique outlets like Eurasia Group and Ankura an opportunity to brief boardrooms on the rising cyber threats and conflict hotspots of the day.
Yet many of today’s investors grew up with the assumptions of the last era of globalization may be poorly placed to accurately judge geopolitical risks before they strike a blow to their portfolio.
Only time will tell if similarly themed funds like CRTC can also leverage this emergent demand for strategically savvy investing.
With the addition of this latest fund, Xtrackers U.S. now boasts a suite of 44 funds, with six launched in total this year.
This unique fund carries an expense ratio of 35 basis points.
This article was produced and syndicated by Wealth of Geeks.