By Simon Smith, CFA
Fount Investment, a South Korean fintech firm, has made its ETF debut with the launch of a pair of thematic equity strategies on NYSE Arca.
The funds – the Fount Metaverse ETF (MVTR US) and Fount Subscription Economy ETF (SUBS US) – provide exposure to stocks globally (including emerging markets) associated with the metaverse and subscription services.
Both the metaverse and subscription services are two rapidly growing markets.
The metaverse describes an immersive network made up of persistent, shared, three-dimensional virtual spaces in a virtual universe. Its proponents contend that this is the future iteration of the existing internet.
Subscriptions, meanwhile, are becoming an ever more common pathway for consumers to acquire utility of a product with younger generations, in particular, fully at ease with a usership model.
Fount has partnered with white-label ETF provider Exchange Traded Concepts to bring the funds to the US market.
Young-Been Kim, Chairman of Fount, said: “We believe that new technologies are creating seismic changes in the ways that individuals interact with the world around them, melding the digital and real world, and changing the way that products and services are consumed. We believe our new ETFs provide investors with an attractive vehicle to gain exposure to these technologies.”
J. Garrett Stevens, CEO of Exchange Traded Concepts, added:
“We are excited to work with Fount to bring these ETFs to market. These funds complement ETC’s strategy of looking to provide investors with new thematics which we believe have the potential to disrupt the status quo.”
Each fund comes with an expense ratio of 0.70%.
Fount Metaverse ETF
The Fount Metaverse ETF tracks the Fount Metaverse Index, a proprietary index designed to measure the performance of companies that develop, manufacture, distribute, or sell products or services related to metaverse technology.
The index construction process begins by identifying certain themes in which companies are likely to be engaged in areas of the metaverse.
These include ‘Augmented Reality’, an interactive experience of a real-world environment where the objects that reside in the real world are enhanced by computer-generated perceptual information; ‘Life Log’, a personal record or dataset of one’s daily life likely captured by wearable technology and mobile devices; ‘Mirror World’, a representation of the real world in digital form, and ‘Virtual World’, a computer-simulated environment.
Fount compiles publicly available information regarding the companies operating in these sub-industries and applies a proprietary artificial intelligence algorithm that extracts patterns from analysing data, resulting in the identification of metaverse companies.
After identifying the initial investment universe, each company’s one-year forecasted revenue is reviewed and only companies that are expected to derive more than 50% of their revenue from a metaverse sub-industry are included.
These companies are then reviewed to ensure they are consistent with the theme of the index, and the top 50 securities by market capitalization are selected for the index, with a minimum market capitalization of $300 million required for initial inclusion.
Constituents are weighted according to a modified market capitalization weighting methodology that factors in expected metaverse sub-industry revenue, subject to weight caps such that no individual stock may represent more than 10% of the index and the aggregate weight of each stock representing more than 5% of the index may not exceed 40% of the index.
The index is rebalanced on an annual basis.
Fount Subscription Economy ETF
The Fount Subscription Economy ETF tracks the Fount Subscription Economy Index, a proprietary index designed to measure the performance of companies providing subscription services.
The index construction process begins by identifying certain sectors of the economy in which companies are likely to offer subscription services. Such sectors presently include business services, consumer services, technology, and telecommunications.
Fount compiles publicly available information regarding the companies classified in these sectors and applies a proprietary artificial intelligence algorithm that extracts patterns from analysing data, resulting in the identification of companies engaged in providing subscription services.
After identifying this initial investment universe, each company’s one-year forecasted revenue is reviewed and only companies that are expected to derive more than 50% of their revenue from subscription sector services are included.
These companies are then reviewed to ensure they are consistent with the theme of the index, and the top 50 securities by market capitalization are selected for the index, with a minimum market capitalization of $300 million required for initial inclusion.
Constituents are weighted according to a modified market capitalization weighting methodology that factors in expected subscription sector revenue, subject to weight caps such that no individual stock may represent more than 10% of the index and the aggregate weight of each stock representing more than 5% of the index may not exceed 40% of the index.
The index is rebalanced on an annual basis.
Source: https://www.etfstrategy.com
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