PureFunds has crafted a niche for itself when it comes to rolling out technology-driven exchange-traded products. Cyber security, drone economy strategy, video game technology, big data and analytics or health tech, you name it and PureFunds has a fund for it. Continuing its legacy, the issuer recently launched a FinTech ETF, namely Purefunds Solactive Fintech ETF FINQ (read: PureFunds to Stop Hackers with This Cyber Security ETF).

What Is Fintech?

As per Investopedia, fintech initially meant “computer technology applied to the back office of banks or trading firms”, but now it has widened its horizon to include several kinds of technological involvement in the financial sector.

Mobile banking, mobile trading on commodities exchanges and digital wallets are some examples of financial technology, going by investopedia. With this, the efficiency of the financial services will be enhanced and users will be better-serviced.

Inside FINQ

The fund looks to track the Solactive FinTech Index and offers investors exposure to  technological innovation across the financial sector. The fund holds around 31 stocks. As of September 4, 2016, no one stock comprises more than 3.85% of the basket. Square, Silverlake and On Deck Cap are the three top companies of the fund. The fund charges about 68 bps in fees.

The fund has a focus on smaller-cap stocks with about 60% exposure, followed by 22% exposure in mid-cap stocks and 16% in large-cap stocks. Growth stocks mainly dominate the fund with about 70% of the exposure. Domestic stocks account for about 75% of the fund (read: Why Small-Cap Value ETFs Are Winning Picks Now).

How Does This Fit in a Portfolio?

The fund provides a good opportunity for investors to play the niche area of fintech, a market where there is both hype and promise.

As per the issuer, the advancement of the technology has spread into every corner of the business. Growth in sectors such as healthcare and communications has largely been possible because of the technological boon.

The financial sector is also no exception as it has started deploying technological solutions. The issuer also stated that this emerging FinTech segment expanded about 75% in 2015 and is thus a lucrative investment destination at the current level (read: Financial ETFs Surged in August: Will the Rally Last?).

Also, technology stocks have been in a great shape lately, giving another reason to investors to play this fund. With the U.S. economy on the mend and the Fed looking to hike rates in the coming days if and when it gets cues of a sustained economic recovery, this smaller-cap oriented FinTech ETF should outperform.

Competition

Though the fund should not face any direct competition as FINQ is quite new theme-wise, its holdings have presence in other ETFs. For example, one of FINQ’s holdings – Square Inc SQ – has about 3% weight in CrowdInvest Wisdom ETF WIZE.

Another holding, Fair Isaac Corp FICO, has exposure to PureFunds’ ETF ISE Big Data ETF BIGD. On a general level, tech ETFs like SPDR S&P Software & Services ETF XSW may give little competition (read: Time to Buy These Tech ETFs?).