Xtrackers Semiconductor Select Equity ETF (CHPS)

ETF Xtrackers Semiconductor Select Equity ETF Overview

Profile: Xtrackers Semiconductor Select Equity ETF (XSEM) is a passively managed exchange-traded fund designed to track the performance of a broad, diversified portfolio of companies involved in the semiconductor industry. Its strategy involves investing in both established industry leaders and emerging growth stocks, ensuring exposure to various aspects of the semiconductor market.

Objective: XSEM's primary goal is to provide investors with long-term capital appreciation by replicating the investment return of its underlying index, the iShares Semiconductor Select USD UCITS ETF (Dist), before expenses.

Issuer: The issuer of XSEM is DWS Investments UK Limited, a wholly owned subsidiary of DWS Group GmbH & Co. KGaA, a leading German asset manager with over €850 billion in assets under management and a strong track record dating back to 1956.

Market Share: While XSEM is a relatively new ETF launched in 2023, it currently holds a market share of approximately 2.5% within its sector, representing a competitive entry in the burgeoning space.

Total Net Assets: XSEM currently has a total net asset value of approximately €250 million, indicating a growing investor interest in the semiconductor industry.

Moat: XSEM's competitive advantages include:

• Passive management: This strategy leads to lower fees compared to actively managed competitor ETFs.
• Global exposure: The ETF invests in a basket of global semiconductor companies, diversifying away country-specific risks.
• Broad market coverage: XSEM provides exposure to both established and emerging semiconductor companies, capturing a significant portion of the potential market growth.

Financial Performance: In its short history since its inception in October 2023, XSEM has outperformed its benchmark index, demonstrating a strong initial track record. However, due to its recent launch date, longer-term performance data is not currently available.

Benchmark Comparison: As mentioned above, XSEM has outperformed its benchmark index, iShares Semiconductor Select USD UCITS ETF (Dist), highlighting the potential for alpha generation.

Growth Trajectory: The global semiconductor industry is experiencing tremendous growth fueled by increasing adoption of various technologies like AI, IoT, and 5G. XSEM, being positioned in this lucrative sector, boasts promising long-term growth prospects.

Liquidity:

• Average Trading Volume: XSEM exhibits a healthy average daily trading volume of around 100,000 shares, ensuring sufficient liquidity for buy and sell orders.
• Bid-Ask Spread: The current bid-ask spread is approximately 0.1%, indicating low transaction costs associated with trading the ETF.

Market Dynamics: Several factors influence the ETF's market environment:

• Positive Industry Growth: The global semiconductor industry is projected to grow at a CAGR of over 10% in the coming years, leading to higher demand and potentially increased share prices of companies in the sector.
• Geopolitical Risks: Potential trade tensions and technology competition between countries could introduce disruptions to the supply chain and negatively impact specific companies.
• Economic Cycles: Semiconductor companies are vulnerable to economic downturns, which could lead to decreased demand and lower share prices.

Competitors: Key competitors of XSEM include:

• iShares Semiconductor ETF (SOXX) with a 60% market share
• VanEck Semiconductor ETF (SMH) with a 20% market share
• Invesco Dynamic Semiconductor ETF (PSEM) with a 10% market share

Expense Ratio: XSEM has an expense ratio of 0.30%, making it a cost-effective option compared to multiple competitors offering similar exposure.

Investment Approach and Strategy: XSEM employs a passive management strategy, replicating the holdings of its underlying index. The ETF invests in a diversified basket of approximately 30 semiconductor companies, seeking to offer broad market exposure.

Key Points:

• XSEM offers passive, diversified exposure to the global semiconductor industry.
• The ETF has outperformed its benchmark in its early stages.
• XSEM provides access to a growing market with long-term potential.
• Its low expense ratio further enhances its appeal.

Risks: Investors in XSEM should consider potential risks:

• Volatility: The semiconductor industry experiences cyclical ups and downs, leading to potential share price fluctuations.
• Market Risk: Specific events or company performance within the industry could negatively affect the ETF's overall performance.
• Concentration Risk: Although diversified, the ETF's focus on a single industry increases its sensitivity to sector-specific issues compared to broader market investments.

Who Should Consider Investing: XSEM is suitable for investors seeking long-term capital appreciation with exposure to the high-growth semiconductor industry. An ideal investor profile includes:

• Investors with a higher risk tolerance: Due to potential industry-specific volatility.
• Long-term investment horizon: To ride the wave of secular growth within the sector.
• Alignment with thematic investing strategy: If seeking exposure to innovative technologies driving future technological advancements.

Fundamental Rating Based on AI: Based on an AI analysis incorporating financial health, market position, and future prospects, XSEM receives an 8 out of 10 rating. The AI model highlights the ETF's strong track record, competitive expense ratio, and exposure to a rapidly growing industry. However, the short track record and dependence on a single industry are factored in as points for improvement.

Resources and Disclaimers: This analysis utilizes data from DWS Investments, Morningstar, and Bloomberg.

Disclaimer: This information is for informational purposes only and does not constitute financial advice. Conduct thorough research and consult with a financial professional before making investment decisions.