Concerned by the growing concentration risk in the U.S. stock market? Megacap tech names have played a significantly outsized role in the overall performance of U.S. stocks this year. Riding a wave of excitement about A.I., those firms in turn play a major, major role in many investor portfolios. That does pose a risk if those names start to disappoint. Adding some foreign tech investing diversification in an ETF like OGIG could help.
See more: Thematic ETF Plays on the Growing Digital Economy
OGIG, the ALPS O’Shares Global Internet Giants ETF, provides exposure to both U.S. and foreign tech firms. Charging 48 basis points (bps), it tracks the O’Shares Global Internet Giants Index.
The strategy looks for interest-related firms with growth and quality characteristics. It assesses quality based on factors such as cash burn rate. It also measures quality defined by a firm’s revenue growth rate, too. The foreign tech investing ETF looks for firms within a list of 1,000 U.S.-listed names as well as 500 European, Pacific basin, and emerging markets universes.
As of now, per VettaFi data, that has led the strategy to combine those big tech names in the U.S. with key foreign names. For example, it invests in South American e-commerce platform MercadoLibre (MELI), currently holding it at a 1.7% weight. It also provides exposure to firms like Meituan (MPNGY), a Chinese shopping platform, which adds some helpful, honed exposure to the Chinese consumer.
OGIG has returned 33.4% over the last one year period and 9.7% over the last five years taking that approach. Having launched more than five years ago, the strategy has a long track record that speaks to its capabilities as a fund. For investors looking to add some foreign tech investing, OGIG may present one notable option.
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