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A DIET-Friendly ETF From Defiance

Sanghamitra Saha

There is a palpable growth in inclination for diet-friendly products. “Need for healthier, sustainable, environmentally-friendly and resource-efficient food supplies is a likely focus for the food and agriculture innovation sector in the coming years and decades.” Climate change, declining resources and fast-growing population would necessitate cutting-edge food and agricultural reforms and technology.

This is why Defiance ETF launched a product called NextGen Food & Sustainability ETF DIET in mid-November.

DIET in Focus

Cutting-edge food and agricultural reforms cover sectors such as farming, seed science and treatment, online food delivery, natural flavorings and fragrances and plant-based meat substitutes, per the issuer.

The fund tracks the BlueStar Food and Agriculture Sustainability Index. It is a rules-based index which includes equity securities of leading global companies whose business activity, products, or services are related to the following industries. The fund charges 30 bps in fees. It has considerable weight in Mowi ASA (5.37%), Nutrien Ltd (4.74%) and Corteva (4.57%).

The United States has the largest exposure of 47.94%, followed by Norway (11.57%) and Canada (7.08%). Food Flavors and Fragrances (19.88%), Agriculture Chemicals (17.31%), Sustainable Meat, Poultry, Seafood Farmer (14.07%), Agriculture Equipment and Irrigation Systems (11.77%) and Branded Healthy Foods and Protein (10.59%) have double-digit weights in the fund.

How Does It Fit In a Portfolio?

The fund points to the sustainable investing. “More than eight in 10 U.S. individual investors (and 9 in 10 millennial investors) now express interest in sustainable investing.” Over the long term, ESG investing results in higher profits.

To restore food sustainability, health, ethics or environment, more people are adopting plant-based food substitutes. In the United States, plant-based food sales increased 20% from 2017-2018 to more than $3.3 billion, per the issuer’s investment case. Sales from plant-based meats were up 24%, hitting $670 million. In short, “fl exitarianism” is on the rise given resource shortage and health consciousness.

Los Angeles-based Beyond Meat BYND came with an IPO in May 2019 and its returns surged 800% in the first few months. There is a growing need for scientifically-enhanced seeds to feed rising population and maintain their health.

The investment case went on to point out that the “food innovation” industry has now a market value of about $135 billion and investment in agricultural-related technology jumped to about $17 billion in 2018, up 43% year over year.

Is There Any Competition?

Though the fund does not have direct competition, The Organics ETF ORG might give the newbie some competition. The fund tracks the performance of companies globally that are positioned to profit from increasing demand for organic products, including companies which service, produce, distribute, market or sell organic food, beverages, cosmetics, supplements, or packaging. The fund charges 35 bps in fees.  

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The Organics ETF (ORG): ETF Research Reports
Beyond Meat, Inc. (BYND) : Free Stock Analysis Report
DEFNC-NXGN F&A (DIET): ETF Research Reports
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