Working from home has become part of millions of people’s daily lives. Now it is also an investment strategy.
Fund provider Direxion launched an exchange traded fund on Thursday using the ticker WFH, to tap into US-listed companies positioned to benefit from the mass move to remote working.
The ETF tracks the Solactive Remote Work Index, which is made up of 40 equally weighted companies across four sectors — cloud technology, cyber security, remote communications and online document management.
Constituents are the 10 most “relevant” companies in each category, according to Milwaukee-based Direxion, and include video conferencing platform Zoom, social media giant Facebook and cybersecurity company CrowdStrike.
Dave Mazza, managing director and head of product at Direxion, said the theme had already been popular, claiming that a resurgence of Covid-19 case counts in the US had “changed investors’ psyche again”.
Assets held in ETFs around the world have soared over the past decade, pushing through the $6tn mark last November and again in May, following the rebound from a sharp March sell-off, according to data provider ETFGI.
Although the ETF industry is dominated by a group of large funds that track broad market indices like the S&P 500 or the Bloomberg Barclays Aggregate, for the most part managed by the “Big Three” — BlackRock, Vanguard and State Street, a vast range of niche products launched by smaller providers has sprung up in recent years.
JPMorgan says that about 260 ETFs were launched each year between 2015 and 2019, and another 90 have been unveiled this year despite the turbulence triggered by the coronavirus outbreak. Many have been thematic ETFs that mimic bespoke indices of stocks in loosely defined sub-sectors, that are often given a catchy stock market ticker to appeal to retail investors.
They include CATH, a fund that invests in companies that fit into guidelines set out by the United States Conference of Catholic Bishops; GAMR and NERD, two video-gaming and e-sports ETFs; and SHE, a State Street ETF that tilts towards companies with greater gender diversity.
Mr Mazza said Direxion had started planning the launch of the WFH ETF before coronavirus hit, as remote working became more popular, but accelerated its timetable this year.
Tech stocks have been among the biggest winners of the recent market rally, driving the rebound in US equities and further afield. Last month Norwegian videoconferencing company Pexip became one of the few European companies to sell new shares, in what was the largest Scandinavian software offering on record.
Although some of the WFH constituents are popular companies trading at high multiples to earnings, Mr Mazza noted that the fund also included more obscure names such as virtual office app 8×8 and cybersecurity company Elastic.
Mr Mazza said Direxion, which had about $15bn of assets under management at the end of last year, was also working on the launch of a consumer ETF that tracks companies that provide virtual services, such as home entertainment, online education and telemedicine.
WFH closed 1.4 per cent higher on its first day trading on NYSE’s all-electronic Arca market, better than the 1.1 per cent rise of the tech-heavy Nasdaq Composite.