Global X, the New York-based fund provider focused largely on
commodity and emerging markets, rolled out today the marketâs
first ETF to focus solely on social media companies, recalling
First Trustâs niche Internet-linked funds.
The Global X Social Media Index ETF (NasdaqGM:SOCL) is the first
portfolio allocated entirely to social media names, tracking the
25-security free-float, market-capitalization-weighted Solactive
Social Media Index. It comprises companies involved with social
networking, file sharing and other Web-based applications. SOCL
comes with a net expense ratio of 0.65 percent.
SOCL will join other niche Internet-linked funds such as First
Trustâs widely successful $557 million First Trust Dow Jones
Internet Fund (NYSEArca:FDN), as well as a smartphone ETF
(NasdaqGM:FONE) and a cloud computing ETF (NasdaqGM:SKYY), which
has gathered $65 million in four months.
But SOCL hones in on the booming global social media industry.
In the U.S. alone, some estimates suggest demand for social
networking among Internet-using adults has nearly doubled in the
last three years, Global X said in a press release, citing a Pew
Research Center survey.
Individuals as well as companies are jumping on the social media
bandwagon, with roughly 84 percent of Fortune 100 companies relying
on âbranded social media channels,â the company added, citing
data from a 2011 Burson-Marsteller study.
âSOCL can provide an efficient way to tap into this global,
dynamic sector,â Global X Fundsâ CEO Bruno del Ama said in a
press release. âThis is a global phenomenon that as an investor,
you might want to participate in.â
The Inner Workings
âAs the industry continues to expand through IPOs, the index
will capture these new companies shortly after their public debut,
providing a relatively cost effective way to gain exposure to the
social media industry,â del Ama said.
That said, new pure-play companies that go public will be added
to the mix only six days after their IPOs, in an effort to keep the
portfolio relevant and updated in the face of an industry that is
quickly changing, del Ama said.
In fact, of the 25 initial securities, seven of them have only
become public very recently, he noted.
Whatâs more, the index methodology limits the weighting of
companies that, while significant in the social media space,
arenât fully focused on the industry.
Names like Google, for instance, can snatch no more than 4.75
percent of the overall basket because social media represents only
a small part of the companyâs total revenues, del Ama said.
SOCL comes to market with Tencent Holdings, Sina Corp, DeNA Co.
and NetEase.com topping its list of holdings. The four companies
each represent 10 percent of the basket, according to Global X
The Importance of China
The global-in-scope portfolio allocates nearly 37 percent of its
country exposure to China, a sizable allocation that reflects the
importance of China's enormous consumer base on the social media
But tapping into Chinaâs notoriously regulated and censored
social media space is best accomplished through local companies
rather than through names like Facebook, which have more limited
access to that market, del Ama noted.
âThese home-grown companies know how to navigate the
regulatory framework, how to deal with the restrictionsâ he said.
âTo capture the Chinese market, you have to have these companies
in the portfolio.â
Meanwhile, the U.S. represents 26 percent of the mix and
Japanese companies making up nearly 20 percent, the company
SOCL is priced in line with Wheaton, Ill.-based First Trustâs
ETFs:SKYY and FDN each cost 0.60 percent, while FONE is the
priciest of them all, at 0.70 percent.
Global X has other niche funds, such as a farming ETF, a fishing
fund and a waste management ETF, to name a few.
The company had $1.3 billion of assets across its various ETFs
as of Nov. 11, making it the 20
-largest ETF provider in the U.S., according to data compiled by
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