Inside the New Education ETF Launched by Global X

The coronavirus pandemic has changed the world from offline to online for everything from work to shopping, learning or playing. As a result, many issuers have come up with new ETF offerings that are coronavirus-themed or support the idea of distant working and learning. One such product is Global X Education ETF EDUT. The fund hit the market on Jul 10. Let’s delve a little deeper.

EDUT in Focus

The fund looks to invest in companies providing products and services that facilitate education, including online learning and publishing educational content, as well as those involved in early childhood education, higher education and professional education.

The fund holds 36 stocks. The top holdings are GSX Techedu Inc- ADR (11.12%), TAL Education Group- ADR (10.84%), New Oriental-ADR (8.40%), Zoom Video Communication (6.37%) and Chegg Inc (5.99%). The United States takes 43.5% of the fund, followed by China (36.5%) and Japan (6.58%).

Higher and Professional Education gets the major share in the fund with about one-fourth exposure, followed by online learning (23.67%) and enterprise video chat and communication (22.67%). The fund charges 50 bps in fees.

How Does the Fund Fit in a Portfolio?

The first half of 2020 was all about the outbreak of coronavirus in late January and its rapid spread to the various parts of the world by the end of the first quarter.  No wonder, Wall Street snapped its longest bull run ever in March. However, unprecedented stimulus measures by global central banks and governments pulled the ailing global markets out very soon from nadir.

As a result, global stocks rallied in early Q2. But a second wave of coronavirus hit the global economy from June. The net result is a growing number of U.S. states as well as several global cities reissuing social distancing standards in past weeks to curb the increase in coronavirus cases.

With virus cases showing no sign of deceleration, it is clear that the threat will be rife in the second half of 2020. As a result, coronavirus-focused investing is likely to rule in 2H. As far as lifestyle goes, the service and education sectors are mitigating the economic and social impact of the pandemic by turning online (read: 3 New Coronavirus-Themed ETFs to Hog Attention in 2H).

The pandemic brushed aside challenges in the space of virtual schooling, giving immense technological insights. “Cloud-based video conferencing software became virtual classrooms. Online learning applications became curriculums and textbooks. And digital learning platforms became teacher’s assistants, helping teachers organize and deliver coursework, while giving students a place to interact with their teachers,” per Global X.

The vast online application of educational technology during these trying times is perhaps the largest in history wherein school administrators and teachers are making utmost efforts to utilize the right technologies to ease the transition from classroom to home. From this angle, we can see that the launch of EDUT is very timely.

Is the ETF Relevant Post Pandemic?

Yes. The fund deals with the broader perspective of the education industry, so it is not pandemic-dependent. Since greater education is directly related to the scope for higher employment, most families today invest hugely in education. The fund also focuses on companies that deal with vocational courses.

Apart from formal educational settings, parents are increasingly depending on tutors. The global private tutoring market is expected to reach approximately $178 billion by 2026, up from $96 billion in 2017, per Zion Market Research, as quoted on Global X. The length and breadth of the entire global education industry has been taken care of by the fund.

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