xETFs lists a fund to bundle AI bottlenecks that already have their own funds
xETFs listed the AI Bottlenecks ETF NECK on September 23 at a 0.75% fee; 11 of its 20 companies already sit in VanEck's data-center supply chain fund RACK, which charges 0.50%.
Key takeaways
xETFs listed the AI Bottlenecks ETF NECK on NYSE Arca on Wednesday, September 23, a day after its Tuesday, September 22 inception. It is actively managed, and it buys companies at the tight spots in the AI buildout, from memory chips to power equipment.
11 of the 20 companies it held as of Sunday, October 4 already sit in VanEck's data-center supply chain fund, RACK, which charges 0.50% against NECK's 0.75%.
As of that Sunday the fund held $506,000, and average daily trading is about $129,000.
The managers generally expect 15 to 25 companies.
SK hynix, Lumentum, Coherent, Samsung Electronics and Micron were the five largest positions, together 42% of the fund.
SK hynix leads NECK, at 10.2% of the fund
Four memory makers, SK hynix, Samsung, Micron and Kioxia, were 30% of the fund.
Lumentum and Coherent make the optical parts that move data between machines. GE Vernova, Eaton, Vertiv and Bloom Energy put power and cooling equipment in the same portfolio.
The prospectus, dated Thursday, September 17, says buyers should expect significant exposure to Asian companies. SK hynix, Samsung, Kioxia and TSMC are already in the fund, and Kioxia trades in Tokyo.
What was already listed
RACK tracks an index and has been listed since June. It held $84.1 million as of Monday, October 5. VanEck said companies in that index must get at least half their revenue from data-center and AI-infrastructure businesses, including semiconductor design, cooling, nuclear energy and electrical equipment.
Nvidia is in RACK and not in NECK.
"NECK is designed to look beyond the most visible AI names," said Garrett Stevens, chief business officer and co-founder of Exchange Traded Concepts, which advises the fund.
Roundhill's memory fund, DRAM, has been listed since April. It charges 0.65% and is the exception on size, with $26.4 billion as of Monday, October 5.
Roundhill's optics fund, LYTE, charges the same 0.65% and held $248 million that day. Lumentum and Coherent are larger positions there than in NECK.
What the extra fee buys
Total return swaps are allowed, and they count toward a rule that at least 80% of assets, plus any money borrowed, goes into bottleneck companies or instruments tied to them. The prospectus says those swaps can magnify losses and depend on the other party to the contract.
Up to 20% can sit in companies that are not bottlenecks yet, but that the managers expect to become ones.
Johnny Wu, founder and chief executive of xETFs, which picks the portfolio, said NECK was designed to "adjust the portfolio periodically as the opportunity set changes." RACK's index is rebalanced quarterly.
The extra 0.25 percentage points over RACK pays for a manager who can shift the mix, use swaps, and keep a slice of the fund for future bottlenecks.
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Frequently asked questions
What does the new fund buy?
It buys companies at the tight spots in the AI buildout, from memory chips to power equipment.
How much overlaps with VanEck's data-center fund?
Eleven of the 20 companies it held as of October 4 already sit in VanEck's data-center supply chain fund.
What does the higher fee pay for?
The extra 0.25 percentage points over RACK pays for a manager who can shift the mix, use swaps, and keep a slice for future bottlenecks.
How large is the fund?
It held $506,000 as of October 4, and average daily trading is about $129,000.
