ProShares last year launched two exchange-traded funds that made it clear it believes traditional brick-and-mortar retailers are a dying breed, and on Monday it reinforced that viewpoint with the debut of the ProShares Online Retail ETF (ONLN).
ProShares’ newest fund tracks the ProShares Online Retail Index composed of both U.S. and non-U.S. companies that sell mainly online or through other non-store channels, such as mobile or app purchases. And fund constituents must have a market capitalization of at least $500 million, among other requirements.
In short, according to ProShares, ONLN focuses on the largest players in online retail. The top holdings in the fund’s underlying index are Amazon.com (24 percent) and Alibaba Group Holding (15.5 percent).
The rest of the top 10 includes Wayfair Inc., Qurate Retail Inc., Chegg Inc., Etsy Inc., Groupon Inc., Netflix Inc., Ebay Inc. and Shutterfly Inc. All of these have weights in the 4 percent range.
The index employs a modified market-capitalization weighted approach, is rebalanced monthly and is reconstituted annually. When the index is rebalanced, it’s weighted so that no company exceeds 24 percent of the value of the index, the sum of companies individually weighing more than 4.5 percent don’t exceed 50 percent and the total weight of all non-U.S. companies will be capped at 25 percent.
ProShares bills ONLN as the first ETF investing only in retailers principally selling online or through other non-store channels. That might come as a surprise to investors in the Amplify Online Retail ETF (IBUY), which comprises a global basket of companies that get at least 70 percent of their revenues from online retail, online travel or online marketplaces.
IBUY has done quite well since its April 2016 launch with assets under management of nearly $498 million and a cumulative share price gain of 110 percent.
“The key distinction is we’re retail exclusive, while IBUY has some travel-related companies which we really don’t consider to be retail,” says Simeon Hyman, ProShares’ global investment strategist.
IBUY’s portfolio includes travel services companies such as Expedia Group Inc., TripAdvisor Inc. and Ctrip, a Chinese company. Amplify ETFs declined to comment for this story.
Among the other differences between the funds is that securities in IBUY have a minimum market-cap of $300 million versus $500 million in ONLN. And whereas ONLN takes a modified market-cap approach, IBUY’s underlying index is equal weighted. Specifically, IBUY’s index is divided into two pools—at least 75 percent is weighted toward U.S. companies and the rest in non-U.S. countries, with constituents equally weighted within their respective pools.