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Tap Tech In Israel With This New ETF

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December 6, 2017 9:27 am
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Tap Tech In Israel With This New ETF

By market capitalization and sheer population, the U.S. is by far the world's largest market for the technology sector. But there are plenty of viable, investable opportunities for technology investors outside the U.S. One of the primary ex-U.S. technology opportunities is Israel, the country also known as “startup nation.”

A new exchange traded fund aims to reflect the growing opportunity set in the Israeli technology space. The ARK Israel Innovative Technology ETF (CBOE: IZRL) debuted Tuesday courtesy of New York-based ARK Investment Management LLC.

While ARK is known for its actively managed ETFs, such as the ARK Innovation ETF (NYSE:ARKK) and the high-flying ARK Web x.0 ETF (NYSE:ARKW), the new Israel ETF will join ARK's stable of passively managed products. IZRL tracks the ARK Israeli Innovation Index.

A Better Way To Consider Israel

The iShares MSCI Israel Capped ETF (NYSE:EIS) is the largest dedicated Israel ETF trading in the U.S. and allocates 28 percent of its weight to technology stocks. That is a large weight to that sector, but a more focused approach such as the one offered by IZRL can be more rewarding for investors.

“Since its inception on Oct. 1, 2015, the ARK Israeli Innovation Index has returned 17.9 percent at a compound annual rate as of Sept. 30, 2017, outperforming the MSCI Israel Index (MXIL: -10.1 percent annualized) and the MSCI Israel Capped Investable Market Index (MISCNU: 4.3 percent annualized),” according to ARK.

IZRL's underlying index “includes equity securities or depositary receipts of exchange listed companies that are incorporated and/or domiciled in Israel and are included in one of the following economic sectors as defined by FactSet Research Systems: (i) health technology, (ii) communications, (iii) technology services, (iv) electronic technology, (v) consumer services, or (vi) producer manufacturing,” according to the ETF's sponsor.

Why IZRL

While Israel is known as a booming technology market, investors should not rely on traditional developed markets ETFs to play this theme. After all, Israel accounts for less than 0.15 percent of the MSCI EAFE Index.

Pure technology stocks account for almost 57 percent of IZRL's lineup, while the healthcare and telecom sectors combine for nearly a third. IZRL has 48 holdings with a weighted average market value of $1.7 billion. The new ETF charges 0.49 percent per year, or $49 on a $10,000 investment.

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