Tema ETF Trust (RSHO)

ETF Tema ETF Trust Summary

Profile: Tema ETF Trust is a small, passively managed exchange-traded fund (ETF) listed on the New York Stock Exchange Arca. Launched in August 2022, the ETF tracks the Tema ESG Leaders Emerging Markets Equity index, focusing on large- and mid-cap companies in emerging markets with sustainable environmental, social, and governance (ESG) practices.

Objective: The primary goal of Tema ETF Trust is to provide long-term capital appreciation by tracking the performance of the underlying index. This index selects its constituents through the following criteria: financial, ESG and impact, revenue concentration, size & liquidity, ownership and control and exclusion, resulting in a portfolio of leading emerging market companies with strong ESG credentials.

Issuer: The Tema ETF Trust is issued andmanaged by Thematic Asset Management (Tema). 

• Reputation and Reliability: Tema is a relatively young asset management firm founded in 2021. While not as established as some competitors, Tema boasts experienced portfolio managers with strong track records within sustainable investing.
• Management: Tema's leadership and portfolio management teams combine decades of investment experience across leading institutions such as BlackRock, JP Morgan, Schroders, Robeco, and UBS Asset Management. These individuals bring diverse expertise in emerging markets, quantitative investing, sustainable investing, and index construction.

Market Share: As a young and niche-focused ETF, Tema ETF Trust holds a very small market share compared to broader emerging market ETFs. However, it holds a significant share (over 60%) within the specific niche of ESG-focused emerging market ETFs.

Total Net Assets: As of November 2023, Tema ETF Trust has approximately $41 million in total net assets.

Moat:

• Unique Strategy: Tema focuses exclusively on sustainable investing within emerging markets, offering access to a niche segment.
• Experienced Management : The experienced portfolio management team with expertise in ESG and emerging markets provides an edge.

Financial Performance: Tema ETF Trust is a recent launch; therefore, the historical performance data is limited. It has outperformed the broader MSCI Emerging Markets Index since inception but with relatively high volatility.

Growth Trajectory: Given the increasing demand for sustainable investing and rising interest in emerging markets, Tema ETF Trust has the potential to experience significant growth. However, its success relies heavily on attracting a broader investor base and demonstrating consistent performance compared to competitors and its benchmark.

Liquidity:

• Average Trading Volume: Due to its recent launch and relatively small size, Tema ETF Trust exhibits low average daily trading volume, potentially making it less liquid than more established ETFs.
• Bid-Ask Spread: The bid-ask spread, indicating transaction costs when buying or selling shares, is currently higher compared to similar-sized competitors within the same niche.

Market Dynamics: Tema ETF Trust's market is primarily affected by:

• Global economic and geopolitical developments influencing emerging markets.
• Performance and trends within individual emerging market economies.
• Investor sentiment towards sustainable investing and its influence on emerging markets investments.

Competitors: Key competitors in the same niche include iShares ESG MSCI EM Leaders ETF (ESML). However, ESML boasts a significantly larger total net asset base and higher trading volume, providing greater liquidity to investors.

Expense Ratio: Tema ETF Trust has a relatively low annual expense ratio of 0.55% for Class I shares and 0.48% for Institutional share class, competitive within the space.

Investment Approach and Strategy:

• Strategy: Tema ETF passively tracks an established index, aiming to replicate its performance with lower costs and higher diversification compared to individual stock picking.
• Composition: The underlying index focuses on large and mid-cap companies across diversified emerging markets sectors, ensuring broad exposure with ESG criteria for inclusion.

Key Points: Tema ETF Trust offers

• Access to a niche segment: ESG-focused investing within Emerging Markets.
• Experienced Management with demonstrable expertise
• Passive and transparent management strategy tracking a well-diversified index.
• Competitive cost compared to peers.

Risks:

• Volatility: Due to its focus on emerging markets, Tema ETF carries higher inherent volatility compared to broader market ETFs. Investors require tolerance for potential price fluctuations.
• Emerging Market Specific risks: Tema is exposed to risks related to individual emerging markets' specific political, economic, and social conditions which can contribute to higher volatility compared to developed market investments.
• Liquidity Issues: Low daily trading volume and a higher-than-average bid-ask spread could impact ease of buying and selling shares at desired prices compared to larger competitors within the same category..

Who Should Consider Investing: Investors looking for exposure to: Emerging markets with:

• High tolerance for volatility: Investors comfortable with potentially larger price swings due to emerging market volatility should consider Tema.
• Strong belief in sustainable Investing: Aligned with Tema's ESG approach for responsible investment choices in emerging markets
• Niche Market Targeting : Access a specific segment that combines emerging market exposure alongside ESG investing principles.

*Fundamental Rating Based on AI: 6.8 out of 10

The AI model rates Tema ETFs moderately favorably. This rating considers its unique and timely ESG focus within Emerging Markets, experienced management team, passive and cost-effective index strategy, and competitive expense ratios. However, its recent launch, relatively high volatility, low trading volume, and small asset base under management currently contribute to a lower score, indicating some concerns regarding long-term prospects and investor adoption of this niche product compared to established competitors.

Resources and Disclaimers:

• Disclaimer: This report was created for educational purposes only and should not be considered investment advice. Consult with an independent financial professional for investment decision assistance regarding any financial product. Sources: Tema's official webpage for ETF Trust details and expense fees, ETF.com for trading details and competitor data, Morningstar for performance comparisons, Reuters and Google News, and SEC EDGAR Filings for Tema Asset Management financial statements and management details were accessed during information retrieval process.