Investing in Xtrackers Thematic ETFs

Already a megatrend today, AI and big data could change everything tomorrow. Participate in the potential of these technologies with our Xtrackers Thematic ETFs.

Trends of the future – Thematic investments

Xtrackers Thematic ETFs offer investors solutions that provide access to investable growth themes which can serve as an attractive complement to traditionally oriented portfolios. They provide the ability to potentially achieve high return opportunities by investing in economic trends.

In addition to our Thematics Semiconductor, Cybersecurity and US Green Infrastructure, our offering also includes the Xtrackers US National Critical Technologies ETF. The product invests in companies that support critical emerging technologies in the U.S. and allied nations worldwide. Companies are selected from a defined investment universe that meet key criteria related to their association with critical technology sectors and their geopolitical risk rating.

Investing in the Themes of Tomorrow

What is Thematic Investing?

Xtrackers thematic ETFs offer the opportunity to invest in megatrends that have the potential to revolutionize our lives and our environment through thematic based selection. They invest in leading companies involved in future themes, such as digitalization or green transition. Stock selection is not based on traditional methods, for example the weighting of countries and sectors, as is the case with conventional indices. Thematic indices consist of companies that are well positioned to benefit from long-term macroeconomic or structural trends across sectors and countries. This investment trend is growing in popularity, as such, the range of themes that are becoming investable through thematic investment is expanding.

How does Xtrackers Thematic Investing work?

Xtrackers ETFs provide exposure to thematic investment styles with green infrastructure, semiconductor and cybersecurity equities, giving investors the opportunity to participate in the long-term growth of three megatrend industries at a competitive cost. Xtrackers interactively assesses and analyses various investment strategies to provide relevant and meaningful thematic offerings to existing and potential investors.

Why Invest in Thematic ETFs?

Thematic investments

  • make potential growth trends investable and allow investors to participate in them.
  • could offer income profiles that are less affected by flattening growth rates and low-interest phases because they focus on long-term growth trends.
  • are an attractive complement to traditionally oriented investments and could make a meaningful contribution to risk diversification.
  • are based on a forward-looking investment approach that differs fundamentally from existing approaches.
  • represent the invested theme in a comprehensive and transparent way.

Growth in Thematic Innovation

​​The thematic ETF landscape is growing rapidly. The below chart represents the growth in thematic ETF offerings available to investors.

Source: Bloomberg, as of July 2022

Embracing a New Era of Geopolitical Risks

The world is experiencing a significant shift in global dynamics. History has witnessed the transition from a bi-polar structure during the Cold War to today's multi-polar landscape, where diverse nations and economies vie for dominance in economic development and influence.[1] This shifting paradigm presents formidable obstacles when addressing pressing global concerns such as climate change, economic governance, and security threats. In this rapidly evolving landscape, cooperation and consensus-building among major powers become increasingly complex.[2]

This shift challenges the U.S.’s capacity to unilaterally dictate the global agenda and assert its influence. It's evident that the competition is no longer limited to land or resources; the new arena of contention is technology[3]. In an effort to secure their place as a market leader, the United States is beginning to decouple from adversarial nations and is placing greater emphasis on supply chain security or “on-shoring”[4].

Why Geostrategic Risk Should be Considered in a Portfolio

Why Geostrategic Risk Should be Considered in a Portfolio

According to the analytical firm J.H. Whitney[5], the rise of other major powers, such as China and Russia, along with the presence of disruptive regional nation-states, such as Iran, has reshaped the international economic landscape. This new world order no longer revolves solely around Western technological prowess and Eastern manufacturing. Instead, the current state of the world is marked by a complex interplay of geostrategic risks and global economic challenges, potentially causing disruptions in supply chains, heightening investment risks, and imposing increased market restrictions.[6]

Factors such as U.S. national security, geostrategic risks, investment decision-making, and the threat of adversarial nation-states have significant implications for businesses, governments, and overall global stability. Diversification, and strategic risk management become essential for businesses to navigate this changing landscape effectively.

Critical Technology Areas - an Overview

A Glimpse into Critical Technology Areas

In order to support and enhance the national security capabilities of the United States, the U.S. Department of Defense (DoD) defines 14 technologies as dual-use, disruptive, emerging, or of critical importance to both national security and economic well-being. Three categories of technology areas acknowledge the diverse and intricate nature of 21st-century technology investment, development, and application.[7]

Seed Areas of Emerging Opportunity

Biotechnology Quantum Science Future Generation Wireless Technology (FutureG) Advanced Materials

Biotechnology is an emerging engineering discipline that uses living systems to produce a wide range of technologies and capabilities.

Quantum Science is the study of physical properties at small, even atomic, scales. Defense applications include atomic clocks, quantum sensors[8], quantum computing[9], and quantum networks.

FutureG is a suite of emerging wireless network technologies enabled by DoD and commercial industry cooperation to enable military operations and ensure a free and open Internet.

Advanced materials explore innovative new materials and novel manufacturing techniques that can dramatically improve many of the Department's capabilities.

Effective Adoption Areas - where there is existing vibrant commercial sector activity

Trusted AI and Autonomy Integrated Network Systems-of-Systems Microelectronics Space Technology

Trusted AI with trusted autonomous systems are imperative to dominate future conflicts. As AI[10], machine learning[11], and autonomous operations[12] continue to mature, the DoD will focus on evidence-based AI-assurance and enabling operational effectiveness.

Integrated Network Systems-of-Systems technology encompasses the capability to communicate, provide real-time dissemination of information across the Department, and effective command and control in a contested electromagnetic environment.

Microelectronics are circuits and components that serve as the "brain" to human-made electronic functional systems. Virtually every military and commercial system relies on microelectronics.

Space technologies include space flight, Space communication and other technologies needed to maintain space operations. Novel space technologies are necessary to enable resilient cross-domain operations.
Renewable Energy Generation and Storage Advanced Computing and Software Human-Machine Interfaces

Renewable energy generation and storage includes solar wind, bio-based and geothermal technologies, advanced energy storage, electronic engines, and power grid integration.[13]

Advanced computing and software technologies include supercomputing, cloud computing, data storage, computing architectures, and data processing.

Human-Machine Interface refers to technologies related to human-machine teaming and augmented and virtual reality.

Defense-Specific Areas

Directed Energy Hypersonics Integrated Sensing and Cyber

Directed Energy Weapons utilize lasers, high power microwaves, and high energy particle beams to produce precision disruption, damage, or destruction of military targets at range.

Hypersonic systems fly within the atmosphere for significant portions of their flight at or above 5 times the speed of sound, or approximately 3700 miles per hour. Hypersonics dramatically shorten the timeline to strike a target and increase unpredictability.

To provide advantage for the joint force in highly contested environments, the Department must develop wideband sensors to operate at the intersection of cyberspace, electronic warfare, radar, and communications.

The Commitment of the US Government to Critical Technologies

The Commitment of the US Government to Critical Technologies

Companies aligned with America’s critical technologies are well positioned to capture the upside of increased federal technology spending. The Department of Defense (DoD) is expected to invest heavily into these technologies: For 2024, the DoD has requested a budget of $842 billion.[14] Of the requested budget, a significant portion is intended to be allocated to technology based use cases. Some of which include:

Cloud computing Space Technology Cyberspace activities Hypersonics
$2.3b[15]

$26.0b[16]

 $13.5b[14] $1.3b[17]

Xtrackers Thematic Offerings

Thematic investing involves identifying overarching trends at the macro level and pinpointing specific investments poised to gain from the realization of those trends.

Critical Technologies

Understanding Critical Technologies

Critical and emerging technologies (CETs) represent a subset of advanced technologies with profound implications for U.S. national security.[18]

Why U.S. Critical Technologies Matter

Technology is central to the future of the United States’ national security, economy and democracy.[19] In order to maintain their position as a world leader, the United States must focus on accelerating and developing their technological capabilities. Moreover, U.S. dominance in these industries also contributes to overall economic competitiveness by driving innovation and additionally creating highly skilled jobs.[20]

Access U.S. Critical Tech with Xtrackers

The Xtrackers US National Critical Technologies ETF (CRTC) replicates the Solactive Whitney U.S. Critical Technologies Index[21] which is designed to track companies that support critical emerging technologies across the U.S. and its allies. The Index  selects companies from a defined investment universe that satisfy key criteria related to their association with critical technology sectors and their geopolitical risk rating.[22]

Fund facts

Fund Ticker ISIN Fund currency Expense Ratio (Gross/Net) Distribution Frequency

Xtrackers US National Critical Technologies ETF

 CRTC US23306X8609
 USD 0.35% p.a. Quarterly

Semiconductors

What are Semiconductors?

Semiconductors are a broad term used to describe devices that have an electrical conductivity level between a conductor and a non-conductor or insulator.[1] In more practical terms, semiconductors refer to a wide range of components that are integral to the functionality of technological devices spanning phones, computers, energy production and electricity, transportation, and healthcare among other use cases.

Why Invest in Semiconductors?

Strong Growth Potential- Technology continues to expand its scope in our daily lives, suggesting continued growth for the semiconductor theme.

  • As technological growth is intrinsically linked to future economic growth, semiconductors are a foundational component of technological evolution over the coming decades.
  • The global semiconductor market size is projected to expand at a compound annual growth rate (CAGR) of 6-8% a year up to 2030.[2]

Strategic Importance - Semiconductors play an essential role in our day-to-day lives.

  • Semiconductors encapsulate a wide range of components integral to the functionality of a broad array of technological devices. Some of the devices powered by semiconductors include smartphones, computers, refrigerators, LED light bulbs, pacemakers, security systems, ETC.[3]

Dynamic Landscape - The semiconductor industry is incredibly dynamic and rapidly evolving.

  • The semiconductor industry is highly dependent on ongoing research and development, which has helped drive tremendous advancements in computing power and other across other applications

How to Invest in Xtrackers Semiconductor Select Equity ETF

The Xtrackers Semiconductor Select Equity ETF (CHPS), using a “passive” or indexing investment approach, seeks investment results that correspond generally, to the performance, before fees and expenses, of the Underlying Index, which is comprised of companies that have business operations in the semiconductor industry and that fulfill certain sustainability criteria.

Fund facts

Fund Ticker ISIN Fund currency Expense Ratio (Gross/Net) Distribution Frequency

Xtrackers Semiconductor Select Equity ETF

 CHPS US23306X8864
 USD 0.15% p.a. Quarterly

Cybersecurity

What is Cybersecurity?

Cybersecurity is the practice of protecting systems, networks, and programs from digital attacks. These cyberattacks are usually aimed at accessing, changing, or destroying sensitive information; extorting money from users via ransomware; or interrupting normal business processes.[1]

Why Invest in Cybersecurity?

Strong Growth Potential - The proliferation of cybercrimes suggests continued growth for the cybersecurity theme.

  • As global activity continues to shift online, vastly more human behaviour is today being conducted in digital environments whose safety is in jeopardy - cyber criminals pose a sophisticated, and growing, danger to countless activities.
  • The global cybersecurity market is projected to expand at a compound annual growth rate (CAGR) of 12.3% from 2023 to 2030.[2]

Serious Problem – The sheer scale of the cyber-crime problem is frightening.

  • The scale and scope of the damage caused by cybercrimes is immense. Mckinsey & Co forecast that the economic cost from cyber-crime will grow to $10.5tn by 2025, representing around a 300% increase from 2015 levels.[3]

Rapidly Evolving Issue - The cybercrime landscape is evolving at a rapid pace.

  • The insidious innovation that cyber-criminals demonstrate requires a constant development of new & innovative cybersecurity solutions. As long as cyber criminals remain ingenious, companies involved in creating these solutions will remain relevant.

How to Invest in Xtrackers Cybersecurity Select Equity ETF

The Xtrackers Cybersecurity Select Equity ETF (PSWD), using a “passive” or indexing investment approach, seeks investment results that correspond generally to the performance, before fees and expenses, of the Solactive Cyber Security ESG Screened Index, which is comprised of companies that have business operations in the field of cybersecurity and that fulfill certain sustainability criteria.

Fund facts

Fund Ticker ISIN Fund currency Expense Ratio (Gross/Net) Distribution Frequency

Xtrackers Cybersecurity Select Equity ETF

 PSWD US23306X8039
 USD 0.20% p.a. Quarterly

US Green Infrastructure

What is US Green Infrastructure?

Green infrastructure is merely infrastructure that takes into account the considerations of environmental sustainability and climate resilience. There is a wide range of sub-themes that investors could identify as opportunities, including renewable energy, green fuels, electrification of the mobility sector, environmental services and pollution control.

Why Invest in US Green Infrastructure?

Government Support – Governments often look favorably on infrastructure investments, as they have the potential to stimulate economic growth and create jobs.

  • The United States has confirmed their commitment to revamping its infrastructure, in a sustainable way, by signing into law two historic acts:
    • 2021: Infrastructure Investment and Jobs Act (IIJA).[1]
    • 2022: Inflation Reduction Act (IRA).[2]
  • It is estimated that over the next five to ten years, the IRA and the IIJA will provide up to US$370 billion in federal funding to clean energy initiatives.[3]

Structural Need - America’s Infrastructure is in clear disrepair. The American Society of Civil Engineers (ASCE) gave America an infrastructure score of a C-.[4]

  • The U.S. population has more than doubled since the 1960s, when most of the country’s major infrastructure systems were designed. Many are reaching the end of their lifespan, and are dangerously overstretched, experts say.[5]

United States Is Lagging Economic Competitors - The United States generally lags its peers in the developed world.[5]

  • According to the World Economic Forum’s Global Competitiveness Report, in 2019, the United States ranked thirteenth in the world in a broad measure of infrastructure quality—down from fifth place in 2002. That places it behind countries including France, Germany, Japan, Spain, the United Arab Emirates, and the United Kingdom.[5]

How to Invest in Xtrackers US Green Infrastructure Select Equity ETF

The Xtrackers US Green Infrastructure Select Equity ETF (UPGR), using a “passive” or indexing investment approach, seeks investment results that correspond generally to the performance, before fees and expenses, of the Underlying Index, which is comprised of companies that have business exposure in the production, generation, or distribution of green energy or are engaged in the establishment of a sustainable infrastructure to enable the use of renewable energy and that fulfill certain sustainability criteria.

Fund facts

Fund Ticker ISIN Fund currency Expense Ratio (Gross/Net) Distribution Frequency

Xtrackers US Green Infrastructure Select Equity ETF

 UPGR US23306X7049
 USD 0.35% p.a. Quarterly

Artificial Intelligence

What is Artificial Intelligence?

Artificial Intelligence (“AI”) refers to the field of computer science dedicated to creating systems capable of performing tasks that typically require human intelligence. AI encompasses a range of technologies and approaches, including machine learning, natural language processing, robotics, and expert systems, all aimed at enabling machines to function with a degree of autonomy and adaptability. 

Why Invest in AI?

A Transformative Technology

  • AI is perhaps the most important technological trend of this century, with the potential to transform the way companies conduct business.
  • Most experts already agree that AI will provide key advantages for future business growth, and is likely to reshape entire industries, drive innovation and shape the future of our interconnected world. 

Exceptional Growth Outlook:

  • AI is expected to rapidly grow to a $3 trillion[23] industry in the next several years and has attracted hundreds of billions in corporate investment.
  • Industry experts predict that AI could add roughly $13[24] -$16[25] trillion to the global economy by 2030, creating up to 14% higher global GDP.[25]
  • Goldman Sachs Research predicts that generative AI alone could drive a 7%, or nearly $7 trillion increase in global GDP and lift productivity growth by 1.5% over a 10-year period.[26] 

A Critical Technology

  • Artificial Intelligence is one of the industries identified by the U.S. Department of Defense as critical for maintaining U.S. military and economic supremacy and will potentially be the beneficiary of government support and funding. 

XAIX – A Proven Approach to Investing in Artificial Intelligence

  • Forward looking. The methodology behind XAIX involves reviewing millions of approved patents on a rolling one-year basis, resulting in selecting companies that are actively positioning themselves to be the key drivers of AI innovation in the future.
  • Pure play. XAIX is a pure-play strategy, targeting AI innovators, as opposed to the broad universe of AI beneficiaries. Our unique selection process allows us to identify companies that are AI producers, and who is merely a user.
  • A global leader. DWS is a recognized leader in Artificial Intelligence investing, having created one of the original AI funds in 2019 and today manages over $4.7 billion in AI-focused ETFs and mutual funds for investors globally.[27] We are now making the same ETF solution available to U.S. investors.



Fund facts

Fund Ticker ISIN Fund currency Expense Ratio (Gross/Net) Distribution Frequency

Xtrackers Artificial Intelligence and Big Data ETF

 XAIX
 US23306X8294
 USD 0.35% p.a. Semi-annually

 

Investing in Future Trends with Thematic ETFs

Xtrackers Thematic ETFs Ticker ISIN CUSIP Total Expense Ratio
Xtrackers Artificial Intelligence and Big Data ETF XAIX US23306X8294 23306X829 0.35%

Xtrackers US National Critical Technologies ETF

 CRTC US23306X8609 23306X860 0.35%

Xtrackers Cybersecurity Select Equity ETF

 PSWD US23306X8039 23306X803 0.20%

Xtrackers Semiconductor Select Equity ETF

 CHPS US23306X8864 23306X886 0.15%

Xtrackers US Green Infrastructure Select Equity ETF

 UPGR US23306X7049 23306X704 0.35%

For a further definition of terms, please visit the Xtrackers Glossary

1. Source: The Institute of World Politics | as of March 2020

2. Source: PeW Research Center | as of June 2022

3. Source: Office of the Director of  National Intelligence | as of March 2021

4. Onshoring is "domestic" outsourcing, which involves moving a company's software development to non-metropolitan - and therefore lower-cost - locations within their own country.

5. J.H.Whitney aims to provide the knowledge and insights necessary to successfully navigate geopolitical challenges to make investment decisions that contribute to the prosperity and security of the United States. For more information: jhwhitney.com

6. Source: J.H. Whitney Messaging

7. Source: DoD | as of February 2022

8. Quantum sensors promise the ability to provide unprecedented accuracy in position, navigation, and timing.

9. Quantum computing can provide unprecedented computational speeds and help solve the Department's hardest analytical problems.

10. Artificial Intelligence (Al) is the software engineering discipline of expanding capabilities of software applications to perform tasks that currently require human intelligence.

11. Machine learning is an engineering subfield of AI that trains software models using example data, simulations, or real-world experiences rather than by direct programming or coding.

12. Autonomy is the engineering discipline that expands robots' abilities to perform tasks while limiting the need for human interaction.

13. Means everything from more efficient batteries to diversifying energy sources and reduced fuel transportation risks.

14.  https://comptroller.defense.gov/Portals/45/Documents/defbudget/FY2024/FY2024_Budget_Request_Overview_Book.pdf

15.  https://iq.govwin.com/neo/marketAnalysis/view/Department-of-Defense-Cloud-Budget-Estimates-FY-2022-2024/7247?researchTypeId=1

16. JP Morgan, The Arsenal: National Security Space in Our Coverage

17. Ibid

18.  https://www.whitehouse.gov/wp-content/uploads/2022/02/02-2022-Critical-and-Emerging-Technologies-List-Update.pdf

19. Source: Biden-Harris Administration's National Security Strategy | as of October 2022

20. Source: J.H. Whitney Messaging

21. The Solactive Whitney U.S. Critical Technologies Index , which is published by Germany-based index provider Solactive AG in reliance on data provided by J.H. Whitney, demonstrates the applicability and capability of the Whitney Geostrategic Risk Ratings.

22. Companies included in the Index are selected based on affiliation with the Office of the Undersecretary of Defense Research & Engineering (OUSD-R&E) modernization priorities. The companies also meet a minimum Whitney Geostrategic Risk Ratings score.

23. Morgan Stanley (December 2023). “Megatrends: How to Invest in the AI Boom”

24. PwC (2017). “Sizing the prize: What’s the real value of AI for your business and how can you capitalize?”

25. McKinsey Global Institute (2018). “Notes from the AI Frontier: Modeling the Impact of AI on the World Economy”

26. Goldman Sachs Research (2023). “Generative AI could raise global GDP by 7%”

27. Source: DWS as of July 1, 2024

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