hold arrow

Choose SUBS for Growth Exposure in Your Clients’ Portfolios

1 min read · 110 views Bong-Geun Choi Dec 19, 2022

The Fount Subscription Economy ETF (SUBS) looks to invest in companies that derive a significant portion of their revenues from offering subscription services.

 

How to Position SUBS in Your Client’s Portfolio
Given the faster revenue growth experienced by companies in the Subscription Economy Index[1], we believe that investors should consider SUBS for a portion of their portfolio’s allocation to growth.

 

Subscription Companies Have Experienced Faster Sales Growth
Companies in the Subscription Economy Index experienced sales growth over the past ten years that significantly outpaced companies in the S&P 5002.  During 2021, revenue grew 16.2% for companies in the SEI versus 12.0% for those in the S&P 500. 

 

Over the past ten years, companies in the SEI experienced a compound annual growth rate of 17.5% compared to the 3.8% CAGR of the S&P 500.

 

And Responded Better to the COVID Lockdown Environment
Many companies were hit hard during the COVID-19-related lockdowns in 2020.  However, companies in the SEI fared much better, experiencing revenue growth of 13.3% versus a decline of 3.7% for the overall S&P 500. 

 

While 2021 sales volumes for companies in the SEI were down compared to their pre-COVID levels, they were up each quarter compared to the same quarter in 2020.

 

All Sectors within the Subscription Economy Performing Well
The number of economic sectors represented in the SEI, at six, is smaller than the broad market.  However, in each of these sectors, sales growth has been stronger than that of companies in the S&P 500 in the 2017 through 2021 period.

 

Not Just a U.S. Phenomenon
Zuora has international versions of its SEI, focusing specifically on Europe and Asia Pacific.  In these regions, companies in the international versions of the SEI also significantly outpaced their comparable broad market indices in the 2017 through 2021 period.

 

The Fount Subscription Economy ETF (SUBS)
The Fount Subscription Economy ETF (SUBS) seeks to provide investment results that, before fees and expenses, generally correspond to the total return performance of the Fount Subscription Economy Index. The Index was designed to measure the performance of companies engaged in the business of providing subscription services, i.e., companies that sell products or services for recurring subscription revenue.

Consider SUBS for exposure to companies that have experienced high growth relative to the S&P 500.

Please note all data sourced from: The Subscription Economy Index: February 2022, Zuora
Past performance is no guarantee of future results.

 


[1] The Subscription Economy Index (SEI) is designed to measure the growth in the volume of business for subscription-based products and services. The index is constructed by Zuora, a subscription consulting company and is not associated with the SUBS ETF nor is it the index that the fund aims to replicate.

[2] The S&P 500 is a stock market index tracking the performance of 500 large companies listed on the stock exchanges in the United States.  Note that some companies that are constituents of the SEI are also constituents of the S&P 500.


 

Bong-Geun Choi

Chief Economist

bchoi@fountinvestment.com

More Posts

What the Future May Hold for the Metaverse

1 min read · 29 views Bong-Geun Choi Jan 20, 2023

Existing Customers Are Often Your Best Customers

1 min read · 64 views Bong-Geun Choi Jan 11, 2023

How the Metaverse May Reshape Retail

1 min read · 83 views Bong-Geun Choi Jan 02, 2023

Are Subscriptions the Future of Social Media?

1 min read · 103 views Bong-Geun Choi Dec 22, 2022

Investors should consider the investment objectives, risks, charges and expenses carefully before investing. For a prospectus or summary prospectus with this and other information about the Fund, please call 855-425-7426 or visit our website at www.fountetfs.com. Read the prospectus or summary prospectus carefully before investing.

Exchange Traded Concepts, LLC. serves as the investment advisor to the Funds. The Funds are distributed by SEI Investments Distribution Co., (SIDCO) 1 Freedom Valley Drive, Oaks, PA 19456. SIDCO is not affiliated with Exchange Traded Concepts, LLC. or Fount Investment Co. Ltd.

Risk Disclosure:

 

Investing involves risk, including possible loss of principal. There is no guarantee the Funds will achieve their stated objectives. In addition to the normal risks associated with investing, international investments may involve the risk of capital loss from unfavorable fluctuation in currency values, differences in generally accepted accounting principles, or social, economic, or political instability in other nations. Emerging markets involve heightened risks related to the same factors, as well as increased volatility and lower trading volume. 

 

The Funds’ concentration in an industry or sector can increase the impact of, and potential losses associated with, the risks from investing in those industries/sectors. For MTVR, the Fund may be concentrated in the entertainment and interactive media & services industries. The entertainment industry is highly competitive and relies on consumer spending and the availability of disposable income for success, which may cause the prices of the securities of companies to fluctuate widely. The prices of the securities of companies in the interactive media & services industry are closely tied to the overall economy's performance. Changes in general economic growth, consumer confidence, and consumer spending may affect them. MTVR may also be subject to the specific risks associated with metaverse companies. These risks include but are not limited to small or limited markets, changes in business cycles, world economic growth, technological progress, rapid obsolescence, and government regulation. Smaller, start-up companies tend to be more volatile than securities of companies that do not rely heavily on technology. Metaverse Companies may rely on a combination of patents, copyrights, trademarks, and trade secret laws to establish and protect their proprietary rights. There can be no assurance that these steps will be adequate to prevent the misappropriation of their technology or that competitors will not develop technologies that are equivalent or superior to such companies’ technology.

 

For SUBS, the Fund may be concentrated in the software industry. Technological changes, pricing, retaining skilled employees, changes in demand, research & development, and product obsolescence can affect the profitability of software companies causing fluctuations in the market price of company securities. 

 

Both Funds are subject to communication services sector risk, which can involve the same risks as being concentrated in the software industry. Network security breaches, potential proprietary or consumer information theft, or service disruption can negatively affect companies’ stock prices.

 

The Funds are non-diversified. The Funds are new and have limited operating histories for investors to evaluate. New and smaller funds may not attract sufficient assets to achieve investment and trading efficiencies. In addition to the normal risks associated with investing, investments in smaller companies typically exhibit higher volatility. 

0 MTVR · SUBS
MTVR · SUBS