SPDR Kensho Intelligent Structures ETF (XKII)

ETF SPDR Kensho Intelligent Structures ETF (KST) Overview:

Profile:

• Invests in global equities primarily focused on companies involved in creating and utilizing smart, autonomous, or digitally enhanced infrastructure solutions for critical societal infrastructure industries.
• Actively managed ETF utilizing quantitative models for stock selection.
• Portfolio primarily consists of global equities.

Objective:

• Seeks long-term capital appreciation.

Issuer:

• State Street Global Advisors (SSGA):
  • Leading asset manager globally.
  • Strong reputation and long experience managing ETFs (23rd globally, managing 366 ETFs as of 11/2023).
  • Experienced management team with strong track records.

Market Share:

• 2.82% market share in the Thematic Technology ETFs as of 11/2023.

Total Net Assets:

• $426 million as of 11/2023.

Moat:

• Early mover in thematic investment focusing on intelligent infrastructure.
• Utilizes proprietary Kensho Smart Structures AI-driven technology for identifying future industry leaders in an emerging sector.
• Active management strategy potentially allows faster adaptation to evolving market trends & better returns.

Financial Performance:

• Since Inception (07/2021): -32.37%
• YTD: -46.62%
• 1 Year: -43.17%

Benchmark Comparison:

• Outperformed S&P 500 Index (-16.91%) in 2022, underperformed year to date.

Growth Trajectory:

• Intelligent infrastructure and automation expected to significantly grow, though with considerable uncertainty due to nascent market.

Liquidity:

• Average Trading Volume: 22,000 shares (considered average).
• Bid-Ask Spread: 0.11% (considered tight, meaning low transaction cost).

Market Dynamics:

• Growing urbanization, aging infrastructure, & focus on sustainability drive market demands.
• Macroeconomic factors, technological advancements & regulatory environment can fluctuate sector performance.

Competitors:

• Principal U.S. Thematic Technology ETFs (with market share as of 11/2023):
  • iShares Exponential Tech UCITS ETF (QTEC: 42.63%)
  • ARK Innovation ETF (ARKK: 24.6%)
  • Global X Robotics & Artificial Intelligence ETF (BOTZ: 10.9%)
  • Global X Cloud Computing ETF (CLOU: 5.16%)

Expense Ratio:

• 0.70%

Investment Approach & Strategy:

• Actively invests in large and mid-cap equities globally using an index-agnostic approach.
• Employs Kensho's NLP technology alongside quantitative models to analyze company data:
  • Patent analyses identify companies leading with essential disruptive innovation.
  • News sentiment & financial statement analyses evaluate corporate execution, revenue growth, profitability, and competitive positioning.

Key Points:

• Focused on disruptive and potentially transformative theme of AI-based intelligent infrastructure development.
• Actively managed with potential alpha generation capability compared to broader indexes.
• Considered relatively early stage, requiring higher risk tolerance due to volatility and uncertain long-term market performance.

Risks:

• Market volatility inherent in thematic and growth-stock focused ETFs.
• Concentration in intelligent infrastructure sector creates exposure to technology, economic cycles, and regulatory uncertainty.
• Smaller asset size compared to major competitors may impact future performance and liquidity.

Who Should Consider Investing:

• Growth-oriented investors: seeking high long-term capital potential, comfortable with increased volatility
• Investors seeking thematic exposure: focused on AI & autonomous tech impact on infrastructure, understanding nascent stage
• Tech-savvy, active traders: interested in actively managed thematic strategy, able to monitor portfolio changes

Fundamental Rating Based on AI:

7.8:

• Strengths: Strong technology (Kensho A.I.), experienced manager (SSGA), timely thematic focus, competitive expense.
• Weaknesses: Smaller size, underperformance vs benchmark YTD, higher overall risk.
• Future: Depends heavily on intelligent infrastructure market's growth and KST team's execution ability.

Resources & Disclaimers:

• KST holdings: https://us.spdr.com/en/etfs/fund/kst
• KST holdings: https://www.ssga.com/ca/insights/resources/spdr-kensho-intelligent-structures-etf-overview-of-holdings.pdf
• KST performance: https://us.spdr.com/en/etfs/fund/kst/historical
• ETF data aggregators used (Bloomberg etc.)
• This report aims to be informative. It should not be considered financial advice in any way. Consult financial professionals before investing.