How to invest in electric cars (and more) with ETFs

The evolution of mobility is revolutionizing our world, transforming the road to the future into a path of sustainability and innovation. The era of electric vehicles, automation, and shared mobility is in full swing, opening up exciting new investment opportunities.

In this context, Exchange Traded Funds (ETF) are emerging as ideal vehicles for investors who wish to participate in this revolution efficiently and diversified. This article will explore the world of ETFs focused on mobility of the future, revealing the possibilities and characteristics. We will discover the advantages and key aspects of three relevant ETFs.

1. iShares Electric Vehicles and Driving Technology UCITS

Among ETFs dedicated to this evolving sector, the iShares Electric Vehicles and Driving Technology UCITS ETF USD (Acc) stands out as a product worthy of attention. This ETF is designed to track the performance of the STOXX® Global Electric Vehicles & Driving Technology index, which includes companies from around the world operating in the electric mobility sector.

The ETF follows a sampling replication approach, meaning it invests only in the most relevant components of the underlying index. This approach aims to efficiently balance the portfolio while minimizing management costs. This aspect reduces expenses, but may not allow precise replication. The dividends generated by the underlying shares, however, are accumulated and reinvested in the ETF, thus helping to maximize the overall return.

With assets under management of approximately 665 million euros (721 million USD), the iShares Electric Vehicles and Driving Technology UCITS ETF USD (Acc) is considered a large ETF. Launched in February 2019, the ETF has demonstrated a strong asset base and performance history that is definitely worthy of attention.

The fund currently holds a stake of 95 holdings, with the top 10 holdings representing 25.50% of the portfolio. Some major ones include Rivian Automotive, NVIDIA Corp, and Eaton Corp PLC. This diversification of holdings helps reduce company-specific risk.

Geographically, the ETF offers significant diversification, with the United States representing 28.60% of the portfolio, followed by Japan (16.01%), South Korea (14, 39%) and Germany (7.55%). This geographic diversification is important to reduce risk related to a specific region and reflects the global nature of the e-mobility sector.

It is important to note that the ETF has shown a positive return over the long term, with a return since inception of +39.37%. However, it has had a mixed performance in recent years, with a decline in 2022 of -22.81%, after a strong increase in 2021 of +26.64%. Over the course of three years, the ETF has returned +27.40%. This historical data is critical to evaluating ETF performance and should be taken into consideration by investors.

The ETF has a 1-year volatility of 18.14% and a 3-year volatility of 19.52%. This data indicates that the ETF is subject to some volatility, which is common in sectors with high growth potential. However, the return for risk is positive, which suggests that the return obtained was commensurate with the risk taken.

In terms of maximum drawdown, the ETF has recorded a high of -21.28% over one year, -27.36% over three years, and -41.27% since its inception. This data reflects the fact that the ETF has suffered significant losses in the past, but it is important to note that it has also shown the ability to recover and generate positive returns over the long term.

2. Xtrackers Future Mobility UCITS ETF 1C

In addition to the iShares Electric Vehicles and Driving Technology UCITS ETF USD (Acc), there is also the Xtrackers Future Mobility UCITS ETF 1C, which is aimed at investors interested in the rapidly growing future mobility sector with particular attention to ESG criteria. This ETF aims to replicate the performance of the Nasdaq Global Future Mobility index, which includes international companies operating in the future mobility sector, with a special emphasis on ESG criteria.

The Xtrackers Future Mobility UCITS ETF is medium in size, with assets under management of approximately 105 million euros (114 million USD). Launched in January 2019, this ETF has demonstrated a strong asset base and a track record of performance to consider.

It currently holds a total of 85 holdings, with the top 10 holdings representing 46.50% of the portfolio. This diversification of holdings is important to reduce company-specific risk.

The Xtrackers Future Mobility UCITS ETF 1C offers significant diversification too, with the largest share of holdings based in the United States (46.56%), followed by Japan (23.83%), and China (5.28%). This geographic diversification helps reduce regional risk and reflects the international nature of the mobility sector of the future.

This ETF has a 1-year volatility of 17.76%, which is moderate considering the nature of the stock markets and the ETF’s ESG focus.

3. Lyxor MSCI Future Mobility ESG Filtered

Finally, the Lyxor MSCI Future Mobility ESG Filtered - Acc is another option that is aimed at investors interested in the growth of the mobility sector of the future, with a particular emphasis on environmental, social, and corporate governance (ESG) sustainability. This ETF tracks the performance of the MSCI ACWI IMI Future Mobility ESG Filtered index, which selects stocks from developed and non-internationally developed countries, focusing on companies whose business model is based on the mobility of the future and highlighting ESG criteria.

The Lyxor MSCI Future Mobility ESG Filtered ETF is medium in size, with assets under management of 264 million euros (286 million USD). Launched in March 2020, this ETF is relatively recent but has demonstrated steady growth of the assets managed. It currently holds a stake in 83 holdings, with the top 10 representing 54.51% of the portfolio. This diversification of holdings helps reduce company-specific risk.

From a geographical point of view, the ETF offers important diversification, like the previous ones, with the United States representing 49.74% of the portfolio, followed by Japan (11.26%), Canada (8.02%) and South Korea (5.07%).

However, the Lyxor MSCI Future Mobility ESG Filtered- Acc ETF has 1-year volatility of 22.29%, which is slightly above average. This volatility can be attributed to the nature of stock markets and the focus on ESG criteria. However, it is important to note that the 1-year risk-return is negative, indicating a lower return than the risk taken.

Overall, these ETFs offer investors several options to participate in the mobility evolution of the future. Each ETF has its own characteristics and offers a unique perspective on the growth sector. However, it is crucial that investors carefully evaluate their preferences, objectives, and risk tolerance before deciding which ETF to invest in. The mobility revolution is an attractive investment opportunity, but as with any investment, diversification and planning are key to long-term success.

The comparison: who is the winner?

The three products, namely iShares Electric Vehicles and Driving Technology, Xtrackers Future Mobility, and Lyxor MSCI Future Mobility ESG Filtered - Acc, offer investors different opportunities to participate in the growth of the mobility sector of the future. All three ETFs follow a full physical replication approach, which allows for direct exposure to selected companies in their respective benchmark indices. Furthermore, all three take ESG criteria into account, reflecting growing attention to the aspect of environmental, social, and corporate governance sustainability.

The iShares Electric Vehicles and Driving Technology UCITS ETF USD (Acc) offers a strong asset base and a broad spectrum of holdings, providing significant geographic diversification. However, short-term volatility may require greater attention from investors.

The Xtrackers Future Mobility UCITS ETF 1C focuses on companies operating in the mobility sector of the future, with a particular focus on electric vehicle technologies. The ETF offers geographic diversification and meaningful holding selection, but it’s important to note that its performance has been mixed in recent years.

The Lyxor MSCI Future Mobility ESG Filtered (DR) UCITS ETF - Acc stands out for its specific focus on ESG criteria and offers global exposure to the mobility sector of the future. Although it has a shorter history than the other two ETFs, it has demonstrated steady growth in assets under management.

In summary, each of these ETFs has its strengths and is part of a rapidly growing sector. Investors should consider their investment needs and objectives, as well as their risk tolerance, before choosing the product best suited to their needs. Diversification and attention to ESG criteria are key aspects to take into consideration in an evolving sector such as the mobility of the future.

Disclaimer The information and considerations contained in this article should not be used as the sole and principal basis on which to make investment decisions. The reader retains full freedom in his own investment choices and full responsibility in making them since he alone knows his risk appetite and his time horizon. The information contained in the article is provided for informational purposes only and its disclosure does not constitute and should not be considered an offer or solicitation for public savings.

Original article published on Money.it Italy 2023-11-10 15:59:41. Original title: Come investire nelle auto elettriche (e non solo) con gli ETF