The performances of two rival funds set to track the shift to remote work have varied widely this year, as investors bet some change brought on by the coronavirus pandemic. will persist more than other changes.
Expert in exchange-traded funds Direxion has begun a “work from home” product at the height of the pandemic in late June 2020. Asset manager BlackRock followed up three months later with a “virtual work and life” ETF.
The two funds look almost identical at first glance, trading under the ticker symbols WFH and IWFH, respectively.
However, their luck has been ruined since economies began reopening earlier this year. WFH is up 58% since its launch, with an 18% gain so far this year. In contrast, BlackRock’s IWFH is down 10% this year and is up just 4% since launch.
The disparity reflects their holdings: WFH’s $115 million portfolio is heavily focused on stocks of work-from-home businesses such as telecoms, cloud computing, and management. online project.
The $5 million IWFH has suffered from exposure to more consumer-oriented businesses such as streaming services, takeout, and video game publishing, which are “to life” of the name. BlackRock declined to comment.
“There is a difference between the new way of working and just staying at home,” said Max Gokhman, Chief Investment Officer at Alphatrai, a San Diego-based asset manager.
Businesses and consumers are also spending more on technology and remote services as workers are limited by the global pandemic in 2020. But while many companies expect to continue operating With a “hybrid” working model, many consumer businesses that thrived early in the pandemic have reported slowing growth.
“Consumers will go back to what they did before, whether it’s outdoor festivals or sporting events or dining out. . . that doesn’t bode well for Spotifys and Netflixes and Pelotons,” Gokhman said.
All three stocks are held by IWFH, but not WFH. Spotify, music streaming service and Peloton, the home-exercise company, is down this year while Netflix is up. WFH’s largest holding is Zscaler, a cloud security company whose stock is up 77% this year.
ETF “thematic” – funds that try to track specific emerging trends – have grown rapidly over the past few years, led by famous examples like Cathie Wood’s ARK Innovation ETF. However, the disparity between the two seemingly similar telecommuting funds highlights the risk for investors.
“The lessons of investing in Wall Street are the same, decade after decade: you have to know what you own,” said Jim Tierney, a portfolio manager at AllianceBerntein. “ETF investing can create more opportunity for confusion if you are buying baskets and don’t know what’s in them.”
David Mazza, Direxion’s head of product, said investors of its WFH ETF have withdrawn this year as they shift focus, but said he still sees it as a successful fund that will remain relevant. when the pandemic recedes.
He said thematic funds can benefit investors, but agrees that the difference between WFH and IWFH highlights the importance of doing research.
“If you are choosing between large-cap US ETFs, there will be times when they are different but over a longer period of time you will get similar returns,” he said. “The second you step out of that and move into an area that’s not cut and dry, you really need to step up the appraisal.”