The latest move into the increasingly popular world of ETF thematic investing strategies is betting on the trend toward cleaner living that gained traction during the pandemic.
Based on an index of 78 companies expected to benefit from healthier and more wholesome lifestyles, the Amplify Cleaner Living ETF (DTOX) starts trading today.
“When it comes to human health and environmental impact, cleaner living is a global trend that’s just beginning,” said Christian Magoon, chief executive of Amplify ETFs. “Consumer, government and corporate spending is powering this mega-trend, and we believe companies with a majority of their revenue from cleaner living products and services are positioned to thrive.”
While this might sound like a fund that belongs in the environmental, social and governance category, it is more on the fringe of ESG, or “ESG light,” according to Chris Versace, chief investment officer and co-founder of Tematica Research, which developed the index the new fund is tracking.
“The companies in this index are catering to a structural shift in consumer demand,” he said. “This is not an ESG play, but a consumer focus play, and we all know that consumers represent two-thirds of the economy.”
According to the fund prospectus, DTOX seeks to provide exposure to companies that derive at least 80% of their revenue from one of five cleaner living market segments. The segments are food and dining, health and beauty, building and infrastructure, energy and transportation.
Magoon compared the fund to the Amplify Online Retail ETF (IBUY), the $1.2 billion fund launched in 2016 to capitalize on the trend toward online retail shopping.
“We liked the breadth of this index; it includes the normal things, but also the largest exposure is food and dining,” he said. “And how many thematic funds have food and dining, health and beauty, and building and infrastructure in the same index? Those kinds of stocks are extremely underrepresented in the thematic funds.”
Todd Rosenbluth, director of mutual fund and ETF research at CFRA, said it is difficult to go wrong when it comes to thematic strategies right now.
“There’s a growing trend to invest in thematic ETFs that combine long-term trends in an effort to reduce the risk profile,” he said.
Some of the names in the index like Tesla (TSLA), First Solar (FSLR), and Fuelcell Energy (FCEL), might seem like obvious candidates for cleaner living. Others, like Beyond Meat (BYND), FreshPet (FRPT), and Lululemon Athletica (LULU), are examples of the unique nature of the index screening process.
“A lot of investors want ESG-like exposure that they can identify with,” Magoon said. “It’s like Peter Lynch talking about investing in what you know and what you see happening, this fund is trying to capitalize on products or services that are better for human health or better for the planet.”
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