Rize launches first European pet care ETF | ETF Strategy

Thematic investment specialist Rize ETF launched the first European ETF targeting the global pet care sector.

Rize launches first European pet care ETF

Pet ownership is expected to increase 14% over the next ten years, according to Morgan Stanley.

THE Rize Pet Care UCITS ETF was listed on London Stock Exchange in US dollars (PETZ LN) and the pound sterling (PAWZ LN) as well as on top Deutsche Börse Xetra (KATZ GY) And Italian Stock Exchange (PETZ IM) in euros.

The fund should also be deployed on Swiss Stock Exchange SIX in Swiss francs (PETZ SW) in the near future.

Pet ownership has increased significantly during the Covid-19 pandemic, as many people have turned to furry companions for social support during lockdown.

Rize believes, however, that the increase in pet ownership is not transitory and is likely to continue due to household formation trends among younger generations such as Millennials and Zoomers.

The company highlights findings from Morgan Stanley’s AlphaWise survey which show that pet ownership is expected to increase by a further 14% over the next ten years, with two-thirds (65%) of 18- to 34-year-olds considering pet ownership. acquire or add a pet in the next five years.

Additionally, pet owners – especially younger ones – have been found to consistently spend more on their pets than previous generations.

These results, combined with the compelling pricing power and inelastic product demand enjoyed by pet care companies, led Morgan Stanley to predict that the trajectory of U.S. household spending per pet will increase from $980 in 2020 to $1,909 by 2030.

Commenting on the factors driving the growth of the pet care sector, Rahul Bhushan, Co-Founder and Managing Director, Rize ETF, said, “Several themes are shaping the future of pet care. First, there is the tendency towards humanization. Over the past 20 years, pets no longer slept in our gardens, but in our beds. We now treat our pets like our children. Anthropologists like John Bradshaw have argued that keeping pets is an integral part of human nature and that what we are seeing today with Millennial and Gen Z families is a new type of pet ownership companionship, more stimulating.

“Second, and related, is the decline of the traditional nuclear family. Many single households and single, childless families are adopting more and more pets, and the growth of our aging population has also led to more furry companions.

“Thirdly, there are our flexible digital – and post-Covid – lifestyles. With the rise of WFH, pet adoption has suddenly become much easier and people are making long-term commitments to their pets. For pet care companies, this has meant big business.

Investment approach

The ETF exploits the pet care theme by following the Foxberry Pet Care Indexan index co-developed by Rize, index administrator Foxberryand research firm Euromonitor International.

The index selects its constituents from a universe of stocks listed in selected developed and emerging markets. To be eligible, a company must have a market capitalization above $750 million and average daily revenue above $2 million.

Using insights from Euromonitor, companies across the universe are assigned topic relevance scores based on the percentage of revenue coming from four sub-themes related to the pet care industry: food, retail, care health and insurance.

Thematic relevance scores range from 1 to 5. Companies deriving less than 20% of their revenue from subtopics receive a score of 1, companies deriving between 20% and 40% of their revenue from subtopics receive a score of 2., and so on, with companies deriving between 80% and 100% of their revenue from the pet care sector receiving the highest rating of 5.

The index selects all items with topic relevance scores of 2 or higher and weights them based on their scores. Replenishment and rebalancing take place semi-annually.

At the end of March, the index had 30 constituents and more than three-quarters (75.6%) of its weighting was allocated to stocks listed in the United States, with the second largest country exposures being Brazil (7.1%), United Kingdom (6.5%). %), and Japan (5.6%).

Notable positions included Pet Center Comercio e Participacoes SA (7.1%), Patterson (6.7%), Petco Health & Wellness (6.5%), Freshpet (6.1%), Idexx Labs (5.7 %) and Elanco Animal Health (5.7%). .

The ETF has an expense ratio of 0.45%.


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