Source, the London-based exchange-traded fund provider, has announced the launch of the UCITS fund that will be the first-ever fund in Europe focused solely on financial technology (“fintech”) companies. It’s no wonder as fintech is one of the most talked-about stories of the century. However, there hasn’t been an easy way to get broad exposure so far.
The new Source ETF tracks the KBW Nasdaq Financial Technology Index, which includes 50 constituents with names ranging from such well-known ones as California-based PayPal and payment network Visa to newer entrants like San Francisco payments company Square among others. The market capitalization of the companies ranges from under $1 billion to over $150 billion. Source has provided all the 50 companies with equal weighting to ensure that the performance of the product is driven by the broader sector rather than the biggest companies.
“Fintech companies are reshaping every part of financial services, from consumer finance and payments to insurance and data processing”, Dr. Chris Mellor, Executive Director, Equity Product Management at Source, said. “The growth of fintech accelerated after the financial crisis, when traditional financial services were under extreme pressure just as consumer behaviour was changing and technologies such as smartphones, cloud computing and big data were taking off. Faster, more efficient and more joined-up technology in the financial arena has driven stellar growth for fintech companies and this trend shows no sign of slowing.”
The fintech ETF is listed on the London Stock Exchange.
The Source KBW NASDAQ Fintech UCITS ETF is the latest in a history of firsts for Source, including launching the first European ETFs focused on biotech and US energy infrastructure. These two ETFs have combined assets of over $1.2 billion.
Source aims to offer highly liquid products that respond to the challenges and requirements of the market. Having partnered with some of the world’s largest investment houses and asset managers, Source intends to create products that either provide exposure to new opportunities in the market or deliver existing strategies more effectively.
The recent research showed that nearly half (46%) of institutional investors surveyed said they expect record investments in the fintech industry in 2017. Meanwhile, the same percentage said a lack of investment vehicles is an obstacle to getting more exposure to it.
The list of financial services spheres most vulnerable to the changes that fintech disruptors can bring looks as follows: consumer banking (59%), payments (43%), financial advice (30%), foreign exchange (30%), asset management (27%), wealth management (20%) and life insurance (20%).