At a time when it seems like every possible earthly theme has been covered by an exchange-traded fund, State Street Global Advisors has gone to the next frontier with Tuesday’s launch of three ETFs—including one with exposure to the commercialization of space travel.
The SPDR Kensho Final Frontiers ETF (XKFF) tracks an index using artificial intelligence and a quantitative weighting model to find companies with products and services involved in the exploration of outer space and the deep sea.
The index was created by Kensho Technologies, a provider of next-generation analytics, machine learning and data visualization systems.
Aerospace and defense companies comprise nearly 69 percent of the fund’s portfolio, and top 10 holdings include industry stalwarts Lockheed Martin Corp., Boeing Co., Northrup Grumman Corp. and Raytheon Co.
Given the concentration of aerospace and defense companies within XKFF’s portfolio, it’s fair to ask why not just stick with one of the ETFs focused on that industry, including the SPDR S&P 500 Aerospace & Defense ETF (XAR), a $1.5 billion fund with stellar returns during the past five years—including a year-to-date gain of nearly 11 percent—that have handily beat its bogey.
Broad-based sector ETFs typically cost less than hyper-focused thematic ETFs, and the XAR fund’s gross expense ratio is a reasonable 0.35 percent. That said, the new SPDR Kensho Final Frontiers ETF’s gross expense ratio is a not-unreasonable 0.45 percent, which is roughly 20 to 30 basis points less than many laser-targeted thematic ETFs.
And whereas XAR is practically 100 percent focused on the aerospace and defense sector, the XKFF fund offers exposure to companies with products and services related to the aerial, underwater and surface-level drone industry.
New Economy And Clean Power
In addition, State Street on Tuesday also rolled out the SPDR Kensho New Economies Composite ETF (KOMP) and SPDR Kensho Clean Power ETF (XKCP) that employ the same basic index methodology used by the XKFF fund.
Regarding KOMP, the fund invests in companies deemed to be disruptive to traditional industries by leveraging exponential processing power, artificial intelligence, robotics and automation. Aerospace and defense is the largest industry sector at 19 percent, followed by a diverse portfolio of 14 other sectors ranging from biotech and life sciences to industrial machinery and consumer electronics. Its gross expense ratio is 0.20 percent.