There's an ETF for that? Electrification

What is Electrification?

As with many thematic ETF categories, electrification doesn't fit neatly into traditional sector classifications like GICS (Global Industry Classification Standard) or ICB (Industry Classification Benchmark).

These systems group stocks into predefined sectors based on their primary business activities, but electrification is far broader, spanning multiple industries.

Tema ETFs describes this concept as a megacycle—a long-term structural transformation that reshapes industries and economies over decades.

The thesis behind electrification is rooted in the idea that as AI adoption and industrial revitalization expand globally, the demand for electricity will surge.

The growth story here isn't just about increasing electricity consumption; it's also about the ecosystem supporting this demand.

This includes utilities responsible for generating and transmitting electricity, as well as companies involved in exploring and producing essential raw materials like uranium, lithium, and copper.

Additionally, there's a focus on the support and ancillary services modernizing the electricity grid. For instance, Global X highlights the role of smart grid technology, which involves advanced systems that monitor and manage electricity flows to improve efficiency and reliability.

If electrification were to be categorized using GICS or ICB classifications, it would reflect a blend of utilities, industrials, and technology, with contributions from energy and materials. This theme represents the convergence of these sectors to support a new era of energy infrastructure.

Global X U.S. Electrification ETF

ZAP

-0.51%

The Global X U.S. Electrification ETF

has experienced notable growth since its launch on December 17, 2024, amassing $63.34 million in assets under management, surpassing the $50 million threshold often considered critical for an ETF's sustainability.

This passively managed fund tracks the Global X U.S. Electrification Index, comprising 46 holdings predominantly in the utilities (79%) and industrials (21%) sectors. This allocation contributes to its above-average 30-day SEC yield of 2.49%.

Among its top holdings are Vistra Corp. and Constellation Energy Corporation, both actively engaged in electrification initiatives.

Vistra Corp. has partnered with Sunrun on a residential battery aggregation program, allowing Texas homeowners with solar and battery systems to share stored energy with the state's power grid, enhancing grid reliability and promoting clean energy usage.

Constellation Energy has secured a $1 billion contract to supply nuclear power to the U.S. government over the next decade, marking a significant step in providing clean, carbon-free energy to federal agencies.

ZAP charges an expense ratio of 0.5%, aligning with the average for thematic ETFs. However, investors should be mindful of its 30-day median bid-ask spread of 0.24%, which, while not ideal, is expected to improve as the fund continues to grow.

Tema Electrification ETF

VOLT

-0.06%

The Tema Electrification ETF

, launched on December 3, 2024, has amassed $43.74 million in assets under management. This actively managed fund carries an expense ratio of 0.75%, aligning with costs typical for active thematic ETFs.

VOLT's portfolio comprises 30 holdings, with a significant emphasis on industrials at 72% and a notable 11% allocation to technology sectors. This contrasts with ZAP which predominantly focuses on utilities.

A key holding in VOLT is GE Vernova, a company formed from General Electric's restructuring. GE Vernova is actively involved in grid modernization and electrification initiatives, aiming to enhance grid stability and integrate renewable energy sources.

Another significant holding is Quanta Services, which specializes in infrastructure solutions for the energy sector. Quanta Services is engaged in system modernization, electrical grid hardening, and renewable energy facilitation, contributing to climate change mitigation efforts.

Geographically, VOLT is diversified, with 70% of its holdings based in the U.S. and the remaining 30% from developed countries, notably France, Ireland, and Switzerland.

VistaShares Electrification Supercycle ETF (EVS, Coming Soon)

VistaShares, a new ETF issuer, has outlined a compelling strategy for an upcoming fund focused on the electrification revolution. The fund will track the BITA VistaShares Electrification Supercycle Index, targeting companies deriving at least 50% of their revenue from key areas like EV components, modern energy grids, and advanced power solutions.

This actively managed fund will employ a dynamic weighting system and invest globally across developed and emerging markets, aiming to capture the full breadth of innovation within the evolving EV and energy landscapes.

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.