WisdomTree on Wednesday rolled out the WisdomTree Modern Tech Platforms Fund (PLAT), an index-tracking product containing mid- and large-cap companies that generate significant revenue from a modern platform business.
The New York City-based exchange-traded product sponsor defines a modern platform business as a company with a non-linear, multi-sided business model focused on creating value by facilitating transactions between interdependent groups of consumers and producers through technology.
According to WisdomTree’s reckoning, linear tech businesses (an example being software-as-a-service companies) tend to be less profitable and have lower valuation multiples because they don’t have the network effects that potentially provide additional high-margin revenue streams.
WisdomTree posits that successful modern platform businesses create value through connections, enabling them to potentially benefit from scale advantages beyond the capability of linear businesses.
Platform types include those offering products, services, investments, payments and social networking outlets, among others.
The PLAT fund’s literature touts that the median sales growth rate of companies in the underlying WisdomTree Modern Tech Platforms Index trounced the comparable rate from components in the S&P 500 Index by low double-digit amounts during the one- and three-year periods ended April 30. Meanwhile, the median earnings growth rate of S&P 500 companies topped that of constituents in the WisdomTree index by more than three percentage points during the one-year period, while the WisdomTree index came out on top by nearly four percentage points during the three-year timeframe.
Top holdings in the fund’s equal-weighted index include Zillow Group Inc., a real estate and rental marketplace; MercadoLibre Inc., an Argentinian e-commerce company and Match Group Inc., owner of several online dating websites. Familiar names such as Amazon.com Inc., Alphabet Inc., Facebook Inc. and Apple Inc. are also in the mix. The index is rebalanced annually.
The U.S. is the largest country by weight at nearly 63 percent, followed by China at 16 percent. The fund has 69 holdings, and its expense ratio is 0.45 percent.
There’s no doubt the platform business model has been a hit among investors, witness the collective high price multiples across various metrics—earnings, sales, book value and cash flow—in the PLAT fund’s index versus comparable metrics in the S&P 500.
Indeed, this is a growth-oriented portfolio, and WisdomTree is positioning the fund as a candidate for growth-oriented investment strategies.