Millennials – population with birth years ranging from 1980–2000 – seem to be a growth driver of the U.S. economy, outpacing baby boomers in 2015 and reflecting over one quarter of the nation’s population. So, investing on this segment’s needs and preferences should be intriguing (read: Thematic ETFs: Smarter Than Regular Smart Beta ETFs?).
As this group has the prospect of comprising 75% of the workforce by 2025, it surely emerges as a long-term bet. As per research by Global X, millennials now earn about $2 trillion, with income projected to grow to $8 trillion by 2025.
Probably this is why issuers got busy in launching millennials’ focused ETFs. First Global X and then Principal Exchange-Traded Funds brought about two such products, namely Global X Millennials Thematic ETF (MILN - Free Report) and Principal Millennials Index ETF (GENY - Free Report) .
These funds give exposure to stocks that deal with the spending pattern and activities of the millennials. Let’s take a look inside these two products and find out the difference between each.
The fund looks to track the Indxx Millennials Thematic Index. Holding about 73 stocks in its portfolio, the fund puts the highest weight in LinkedIn (4.80%), followed by Amazon (3.48%) and Fiserv (3.29%), as per the factsheet. Having debuted in May, the fund has amassed about $3.2 million in assets so far.
The fund is heavy on Internet Software & Services (19.43%) and Internet Retail (14.36%). Apparel, Accessories & Luxury (9.32%) and Residential REITs (9.12%) take the next two spots. The fund is multi-cap in nature, with a tilt toward larger capitalization.
The passively managed fund looks to trackthe NASDAQ Global Millennial Opportunity Index. This is a NASDAQ-licensed index based on principal’s intellectual property (IP).
Given its millennial-based investment objective, stocks in the field of social media, technology, healthy lifestyles and leisure get prominence in the fund. GENY charges 45 bps in fees. It holds 126 stocks in total with Nvidia Corp (2.65%), Tencent Holdings Ltd (2.57%) and Electronic Arts Inc (2.49%) taking the top three spots (read: 4 ETFs to Ride on Facebook's Spectacular Results).
The fund invests about half of its basket in the consumer services sector followed by consumer goods (22%) and technology (17.9%). The index is all-cap in nature. Within a few days of its launch, the fund has managed to gather about $5.1 million in assets.
While MILN is likely to enjoy the first-mover advantage in the longer run because of its early entry to this arena, GENY may relish the advantage of a lower expense ratio. This is because MILN charges 68 bps in fees, which is higher than GENY.
Plus, MILN is more focused on U.S. stocks while GENY has some foreign exposure since it follows a global index. GENY bears less company-concentration risks than MILN.
As far as broad-based competition goes, the duo does face any as such. Still,since millennials have a tendency of splurging on tech-savvy products and eating out, several tech or consumer discretionary ETFs can give MILN and GENY some competition.
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