1. What ETFs is Global X launching and how do they fit in the firm’s fund lineup?
Over the past week, Global X has launched three new thematic ETFs on Nasdaq: Global X Millennials Thematic ETF (MILN), Global X Longevity Thematic ETF (LNGR), and the Global X Health & Wellness Thematic ETF (BFIT).
Each of these funds falls within our thematic suite of ETFs, in the “People” category, which seeks to capitalize on broad changes in demographics and consumer behavior. We have three other thematic categories: “Technology,” which seeks to invest in disruptive and innovative technologies such as social media, “Resources,” which accesses commodity miners for precious and rare metals, and “Values,” which includes strategies for investing in companies that align with particular religious, environmental or social values.
2. What is thematic investing?
Thematic investing refers to the process of identifying powerful macro-level trends and the underlying investments that stand to benefit from the materialization of those trends. Many investors already apply principles of thematic investing, such as identifying investments that could benefit in a rising interest rate regime, in their portfolios. But thematic investing extends far beyond economic policies, and it can potentially be most effective when used to identify opportunities in areas such as changing demographics, evolving consumer behaviors, innovative technologies, and the availability of natural resources.
3. How should investors use thematic ETFs in a portfolio?
Thematic investing is primarily a long-term growth strategy, so we believe investors should use these products in the equity sleeve of a growth-oriented portfolio. Thematic investing tends to cut across geographies and sectors, which can often result in these strategies having low correlations to other growth strategies within a portfolio. Therefore, we believe combining thematic investments with other growth investments can help diversify one’s sources of returns.
4. Is the Millennials ETF only for Millennials?
We believe investors of all ages who are looking for long term-growth potential should consider MILN. Millennials are the largest generation in the US and will make up 75% of the labor force by 2025. In addition, they are set to inherit approximately $40 trillion, which will represent one of the largest transfers of wealth in history[i]. In short, Millennials will become a major driving force of the US economy. At the same time, Millennials have unique spending habits and preferences that separate them from members of other generations. They communicate heavily on social media platforms, consume hours of digital content per day, are physically very mobile, prefer to shop online rather than in stores, tend to be more health-focused than members of other generations, and prefer experiences over physical goods. We believe that the companies that effectively cater to Millennials’ predilections will penetrate a consumer base of 90-million strong and therefore are more likely to outperform the broad market over the long term[ii].
5. Is the Longevity ETF the Baby Boomer version of the Millennials ETF?
In short: No.
The Millennials ETF is specifically focused on the companies that are expected to benefit from a large US generation’s unique spending behaviors and preferences.
The Longevity ETF is global in nature and seeks to benefit from the trend of people around the world living longer. Life expectancies are increasing around the world while birth rates are falling, resulting in a global population that is increasingly represented by seniors. In fact, from 2010 to 2050, the world’s population aged 65 and over is expected to grow 18 times faster than the population of children aged 15 and younger[iii]. We expect companies that serve the unique needs of seniors around the world stand to benefit from this trend. This would include pharmaceutical and biotech companies that address age-related ailments, senior care and nursing facilities, medical devices used by the senior population, and health care service providers that focus on seniors.
6. Can you run me through the Health & Wellness theme?
Health and wellness is based on changing consumer habits as people place a growing premium on being fit, happy, and energetic. Health and wellness is already a more-than-$3-trillion industry with a variety of companies involved in healthy eating and nutrition, fitness, preventative medicine, and wellness lifestyle[iv]. We believe the main forces propelling the health and wellness industry are longer lifespans, increasing health care costs and the desire to combat rising cases of obesity. All three of these trends are leading people to proactively improve their health.
The original text of this Q&A can be found on Global X’s blog.
Investing involves risk, including the possible loss of principal. The investable universe of companies in which the Funds may invest may be limited. In addition to normal risks associated with investing, international investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from social, economic or political instability in other nations. The funds are non-diversified which represents a heightened risk to investors. LNGR invests in securities of companies engaged in Healthcare, Pharmaceutical, Biotechnology and Medical Device sectors. These sectors can be affected by government regulations, expiring patents, rapid product obsolescence, and intense industry competition. MILN invests in securities of companies engaged in Information Technology which can be affected by rapid product obsolescence, and intense industry competition.
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[i] Source: Merrill Lynch, http://www.bofaml.com/content/dam/boamlimages/documents/PDFs/millennials_primer.pdf.
[ii] Source: US Census Bureau. 2014 Population Estimates.
[iii] Pew Research Center, “10 Projections for the Global Population in 2050,” 2014.
[iv] Global Wellness Institute, 2013. ‘Other’ category includes beauty products and other categories that are not in the more narrow definition of ‘health and wellness’.