Market Overview

Consider These New ETFs In A Megatrend Search

Consider These New ETFs In A Megatrend Search

BlackRock Inc. (NYSE: BLK)'s iShares brand, the world's largest issuer of exchange traded funds, is looking to flex its muscles in the thematic ETF arena — the group of funds emphasizing narrow, but often fast-growing and tantalizing investment niches.

What Happened

As part of what is expected to be a broader suite of so-called megatrend ETFs, iShares launched the iShares Cybersecurity and Tech ETF (NYSE: IHAK) and the iShares Genomics Immunology and Healthcare ETF (NYSE: IDNA) Thursday.

“iShares megatrend ETFs are unconstrained index equity ETFs that seek to track indexes developed by leading industry index providers,” iShares said in a statement.

“The global indexes target stocks with high return potential across relevant industry value chains. For example, investment opportunities for autonomous vehicles would include not just carmakers, but also hardware companies making road sensors and navigation cameras, and battery manufacturers.”

Why It's Important

IHAK, the new cybersecurity ETF, tracks the NYSE FactSet Global Cyber Security Index and holds 39 stocks. Two existing, dedicated cybersecurity ETFs are on the market, but IHAK may be able to make inroads against those competitors, as the new iShares product has a lower fee.

IHAK's annual fee is 0.47% per year, or $47 on a $10,000 investment, while the established cybersecurity funds charge 0.6% per year.

Nearly 93% of the new ETF's holdings are American and Israeli companies. IHAK's top 10 holdings include Cyber Ark Software Ltd. (NASDAQ: CYBR), Zscaler Inc. (NYSE: ZS) and Arista Networks Inc. (NASDAQ: ANET).

What's Next

The iShares Genomics Immunology and Healthcare ETF also enters an arena with two existing funds, and like its cybersecurity stablemate, IDNA undercuts its rivals on fees. The two existing genomics ETFs have annual fees of 0.75% and 0.68%, but IDNA goes well below those figures with a yearly expense ratio of 0.47%.

IDNA tracks the NYSE FactSet Global Genomics and Immuno Biopharma Index and holds 48 stocks, 82% of which are domestic companies.

IDNA's top 10 holdings include Array Biopharma Inc. (NASDAQ: ARRY), Seattle Genetics Inc. (NASDAQ: SGEN) and Bluebird Bio Inc. (NASDAQ: BLUE).

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