Water and clean energy ETNs

FNB listed six new ETNs on 17 August 2021. They are feeder funds, two each tracking; Global Clean Energy, Global Water and Socially Responsible Investing (Developed Markets).

Each underlying index has two ETNs issued in slightly different flavours. A Compo and a Quanto. Both naturally trade in Rands on the JSE but the movement of the currency is treated differently.

With the Compo the move in the Rand/US$ is taken into account and as such will affect the price of the local ETN. The Quanto however removes the currency effect so only moves in line with the US$ ETF it covers. You can tell the difference but the ETN code. Compo ends in C while the Quanto ends in Q.

ETN – is a senior, unsecured debt security issued by a bank. As with any other debt, investors are subject to the credit risk of the bank issuing the debt. An ETN also has an expiry date and in this case, that is August 226. At expired FNB will either pay our cash to holders or offer the option to roll into a new ETN covering the same index.

An ETN cannot be included in a tax-free account.

TER

• Compo ~ 1%
• Quanto ~ no direct fee, but there is a cost due to currency translation.

Global Clean Energy (EGETNC & EGETNQ)

This tracks the iShares Global Clean Energy ETF and the top ten holdings are as below;

• Vestas Wind Systems 7.6%
  • Wind turbines generating electricity.
• Orsted 7.4%
  • Offshore wind farms heat from power stations.
• Enphase Energy Manufactures solar power solutions 7.1%
  • Solutions to increase productivity and reliability of solar systems.
• NextEra Energy 4.3%
  • Wind, solar, and natural gas and multiple commercial nuclear power units.
• Xcel Energy 4.2%
  • Generation, transmission, and distribution of electricity and natural gas.
• Enel SpA 4.0%
  • Produces and distributes electricity for businesses and households.
• Iberdrola 4.0%
  • Wind power.
• Plug Power 3.9%
  • Fuel cells for electric lift trucks.
• SolarEdge Technologies 3.7%
  • Solar power optimisation.
• Scottish & Southern Energy 2.9%
  • Generates transmits, distributes, and supplies electricity.

Global Water (WWETNC & WWETNQ)

The underlying ETF here is the iShares Global Water ETF. The top ten holdings are;

• American Water Works 9.9%
  • Drinking and wastewater services.
• Xylem 9.2%
  • Service provider for water and wastewater applications.
• Geberit Manufactures 5.5%
  • Sanitary, pipes and fittings, installation systems, and drainage and flushing systems.
• Veolia Environ 5.2%
  • Resource management services.
• Halma 5.2%
  • Analysis in safety, environmental and leisure related markets, including water.
• Pentair 5.0%
  • Water and fluid solutions.
• Essential Utilities 4.4%
  • Water utility.
• United Utilities 4.1%
  • Electricity distribution, water, and wastewater.
• Suez 3.8%
  • Potable water supply.
• Severn Trent 3.8%
  • Utility services.

Socially Responsible Investing (SRETNC & SRETNQ)

Tracks the MSCI World Socially Responsible 5% Issuer Capped Total Return Net Index. Top ten holdings as below;

• Microsoft Microsoft Corporation ~ 5.5%
• Tesla ~ 3.8%
• Nvidia ~ 2.6%
• Walt Disney ~ 2.3%
• ASML ~ 2.3%
• Roche ~ 2.0%
• Cisco Systems ~ 1.7%
• Coca Cola ~ 1.7%
• PepsiCo ~ 1.6%

These are an excellent addition to the local passive industry and our preference would be for the Compo ones (taking currency moves into effect) for long-term investors.

Simon

At Just One Lap, we are big fans of passive investment using ETFs. In this weekly blog, we discuss ETFs on the local market and the factors you need to consider when choosing an ETF. If you have wondered how one ETF differs from another, this is where you can find out. We explain which index each ETF tracks, what type of portfolio could benefit from holding each ETF, and how the costs will affect your bottom line.