Focus On The Future Of Tech With This ETF

If any sector can be deemed evolutionary, futuristic and revolutionary, it's technology. Some exchange-traded funds are picking up on those themes.

Consider the SPDR Kensho Future Security ETF XFKS, which debuted in December.

The SPDR Kensho Future Security ETF tracks the Kensho Future Security Index, a benchmark “designed to capture companies whose products and services are driving innovation behind future security, which includes the areas of cyber security, advanced border security, and the following areas for military application: robotics, drones and drone technologies, space technology, wearable technologies and virtual or augmented reality activities,” according to State Street Global Advisors (SSgA).

What Happened

Since it came to market in December, XKFS has performed admirably, returning 11.1 percent. The ETF holds 66 stocks with a weighted average market value of $18.51 billion. Some market observers argue that XKFS is positioned for themes such as increased cybersecurity and high-tech defense spending.

“One aspect of the future of security debate taking on increased urgency is planning for warfare outside the earth’s atmosphere, which is creating the possibility of other-worldly opportunities for investors,” said SSgA in a recent research piece.

Why It's Important

While 15 industry groups are represented in XKFS, the fund devotes 34.66 percent of its weight to aerospace and defense stocks, positioning it for an expected boom in high-tech defense spending. The idea of “Star Wars” military projects may have gone out of style back in the 1980s, but President Trump recently revived the idea.

“In March, President Donald Trump revived the debate about the Pentagon’s space activities with talk of the 'space force,' a branch of the military that would operate in space,” said SSgA.

With that in mind, it may not be coincidence that XKFS is up more than 4 percent over the past month.

What's Next

Other marquee industry weights in XKFS include software, communications equipment and electronic components, giving the fund exposure to drone technology and much more. “Much more” also includes cybersecurity.

“Nearly 1,300 data breaches occurred in 2017—a 21 percent increase from 2016—and more than 174 million confidential records were exposed, according to the Identity Theft Resource Center,” said SSgA. “With statistics like that, it’s no wonder that Warren Buffet sees cyber-attacks as a more significant threat to humanity than nuclear weapons.”

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