Global X, one of the fastest growing ETF issuers in the world, announced further proposals to expand its lineup last week with an SEC filing for five new ETFs. The proposed products look to give investors access to highly specialized corners of the market, following in the footsteps of funds such as the company’s Lithium ETF (LIT), Fishing ETF (FISN), and its Canada Preferred Fund (CNPF). If launched, the funds would bring the company’s ETF total up to 40, excluding the smattering of filings that the firm has detailed over the past few weeks. While expense ratios or ticker symbols were not released for any of the proposed funds, we have highlighted some of the key details from the filing below:
Global X FTSE Toll Roads & Ports ETF
This proposed fund looks to track the FTSE Global Toll Roads & Ports Index which consists of companies that operate or maintain toll roads, airports or seaports. This product could be an interesting pick for investors looking to find infrastructure firms that have pretty wide competitive moats around their businesses. These companies tend to operate at near monopoly levels and can often extract a steady stream of income from customers who generally have no choice but to use these vital facilities. The flip side of this is that the government tends to get very involved, so any changes to regulation could have a huge impact on this corner of the market. This product was somewhat difficult to come up with a list of possible top holdings for, but we think high weights could go to firms such as; Norwegian firm Stolt-Nielsen, China’s COSCO, Dalian Port (PDA) Company Limited, as well as Hutchison Whampoa.
Global X FTSE Railroads ETF
This interesting product looks to follow the FTSE Global Railroads Index which is a benchmark that is comprised of the largest and most liquid companies in the railroad industry. This fund could be an intriguing choice for investors who believe that oil prices are on the rise and that greater demand for rail transport is in our future. Additionally, investors who believe in a further commodity boom could also use this product to play the trend as higher demand for North American commodities in Asia could lead to a spike in railroad usage. Top components could include firms such as Union Pacific, Canadian National Railway, and Norfolk Southern [ETF Plays On Planes, Trains, And Automobiles].
Global X Farmland & Timberland ETF
This specialized fund looks to match the performance of the Solactive Global Farmland & Timberland Index which consists of the largest and most liquid companies engaged in the farmland and timberland industry. This fund could be a good choice for investors seeking exposure to companies that own farmland or timberland areas, possibly paying higher dividends than companies that produce the end products from these locations. Given the ever rising world population and the growing demand for food and shelter, this ETF could do well if rising incomes translate into greater demand for higher quality food and more durable housing. Top components could include firms such as Rayonier, Plum Creek Timber, and Weyerhaeuser [see CUT vs WOOD head to head].
Global X Cement ETF
This fund seeks to track the Solactive Global Cement Index which consists of the largest and most widely traded securities in the cement industry. A cement industry ETF could be an interesting way to play a developing market boom in construction, especially when building cheaper but large buildings when steel is impractical. Furthermore, since the vast majority of cement production is done in emerging markets, it could more of a ‘pure play’ on that corner of the world’s growth than products such as steel which are in heavy demand in industrialized countries. The top holdings in this fund could be firms such as CRH, Cemex, and Texas Industries.
Global X Advanced Materials ETF
This fund looks to follow the Solactive Global Advanced Materials Index which is a benchmark that consists of companies engaged in the ‘advanced materials’ industry which the index provider defines as companies that produce materials with scientific technology and companies that develop new ways to manipulate materials in order to achieve superior performance or reliability. One has to believe that this fund will consist of companies that are pretty cutting edge and are heavily invested in technological applications as well. As a result, this sector could be extremely volatile but could offer big gains if any of the component securities come up with a breakthrough. Additionally, for investors who are concerned over the health of many clean tech and high applications that require a great deal of expensive metals, this fund could be a nice hedge as it could benefit as new methods are unlocked in the industry. Thanks to this fund’s probable focus on small caps in order to get at the heart of the advanced materials industry, coming up with a possible top three holdings wouldn’t do investors much good. Instead, focus on firms that develop carbon fibers or are looking to revolutionize the metals industry in order to get a better handle on investing in this space [Will Toyota's Plans Sink Rare Earth Metal ETFs?].
In terms of competition, it is kind of a mixed bag for Global X; the Cement fund and the Toll Roads & Ports ETF look to face minimal inroads from competitors and could have a relatively smooth path in their quest to gain assets. In the middle is the Advanced Materials ETF, as not enough information is really available in order to make an informed opinion. With that being said, the fund could face some competition from LIT if the product is heavy in battery technology while the product could also see stiff competition from the Market Vectors Rare Earth Metal Fund (REMX) if it focuses more on companies that produce and develop materials as opposed to firms that are higher up in the value chain [see all the materials ETFs here].
Lastly, the remaining two products, the Farmland & Timberland ETF as well as the Railroad ETF could face significant competition from existing products. While no pure play railroad ETF exists, IYT does make significant allocations to the sector, giving firms like Union Pacific and Norfolk Southern top five weightings. However, other companies in the top ten include companies such as FedEx and UPS, suggesting that there is plenty of room for a rail focused fund in the Transportation ETF space as well [see Who Else Wants A Railroad ETF?]. Arguably the toughest road will be left for the Farmland & Timberland ETF, as the product faces significant competition from many already released funds. Beyond Global X’s own Farming ETF (BARN), there are two timber-focused ETFs out there, CUT and WOOD, which have combined to take up roughly $400 million in assets between them. However, since this proposed fund could give investors exposure to both sectors in a single ticker, some investors who are looking for a more diversified approach could be swayed from these existing products and into Global X’s fund, assuming of course that the product passes the many regulatory hurdles first [see Global X's other massive ETF filing here].
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Disclosure: Long LIT.