Overview
As the owner and producer of CES, CTA leads in tracking and evaluating tech trends that matter to investors. Because these trends often signal opportunities, tech-heavy Nasdaq and CTA partner to evaluate companies to package them into “thematic indexes”. These are collections of companies that fit into defined theme categories -- artificial intelligence, cybersecurity and others – that Nasdaq licenses to exchange-traded fund (ETF) and mutual fund providers. Here’s how we work together.
For 13 years, CTA has partnered with Nasdaq to develop and maintain a portfolio of stock market indexes that are theme-based, or tied to broad industry trends such as cybersecurity, digital health and gaming. These thematic indexes are passive portfolios consisting of baskets of companies that have a position in these areas.
Thematic investing in passive funds can offer an important hedge against other active types of investment products, as they track indexes that follow rules-based methodologies and are updated at scheduled intervals. With an active index fund, a fund manager builds a basket of assets, usually put together to track performance benchmarks set by the S&P 500, the Dow Jones Industrial Average and others. This latter approach allows for active buying and selling of securities, typically to boost performance. For this reason, active index investing may be more vulnerable to the whims of a market hungry for what’s hot right now.
While investors can’t buy directly into an index, the Nasdaq CTA indexes are licensed by Nasdaq to financial firms and institutions that sell ETFs, mutual funds and other offerings that track the performance of these indexes. CTA is compensated through licensing fees that grow as investments increase in a financial product that tracks our indexes.
A History in Tracking Innovation
The thematic index partnership started in 2010 when Nasdaq and CTA teamed up to develop the Nasdaq CTA Smartphone™ Index (QFON™). The index features more than handset manufacturers and service providers to include lesser-known businesses in that field such as communications infrastructure providers (e.g., tower companies) and component manufacturers.
As the subject-matter expert, CTA uses a combination of public data and sources, specialized database subscriptions and other data-monitoring strategies to provide the insights for tracking the technology sectors in each index.
As the financial-industry expert, Nasdaq brings its quantitative and regulatory expertise into the creation of its portfolio of indexes. Nasdaq conducts all financial evaluations of securities in an index. These evaluations include factors such as liquidity and trading volume. Nasdaq also develops quantitative methodologies for index weighting, and coordinates index launches and more with regulators.
This combination of qualitative and quantitative expertise helped bring new investing opportunities in the smartphone to the table.
In 2015, CTA and Nasdaq launched the Nasdaq CTA Cybersecurity™ Index (NQCYBR™). Although an obvious theme for an index today, cybersecurity had only just become highly investible as major IPOs hit the market. As one of the first thematic cybersecurity indexes in the sector at that time, this thematic index took off among financial institutions. Today, it serves as the baseline for one of the world’s largest cybersecurity ETFs.
Then, in 2017, the portfolio grew with the launch of the Nasdaq CTA Artificial Intelligence & Robotics™ Index (NQROBO™). In 2018, Nasdaq and CTA launched an AI-only product, Nasdaq CTA Artificial Intelligence™ Index (NQINTEL™). Funds tracking these indexes launched across four countries in 2018, half a decade before today’s market fascination with AI.
Building on the Legacy
Now, CTA maintains 15 thematic indexes with products covering cloud computing, climate technology and much more joining the portfolio. Some 20 funds listed across more than seven countries track the Nasdaq CTA index portfolio.
This expansion affirms CTA’s authority as a third-party index provider, and a leader in identifying and evaluating critical tech trends for the thematic-investing sector.
To build on this legacy, Nasdaq and CTA are looking to the next wave of innovation with development underway for indexes in space and agrifood tech, as well as futuristic concepts such as immortality technology. CES 2024 will showcase innovations in many of these categories when the industry’s best and brightest return to Las Vegas January 9-12. In the meantime, take a closer look at CTA’s thematic indexes.
This content is for information purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any securities. CTA does not offer or sell securities to any persons. No third party is authorized to make any recommendation with respect to any securities or any other disclosures on behalf of CTA. Please consult your financial adviser, investment professional, tax adviser or legal counsel prior to considering any investment.
This content may include or be based in part on projections, valuations, estimates and other financial data supplied by third parties, which have not been verified by CTA. This information should not be relied upon for the purpose of investing in any securities or for any other purposes without independent verification. Any information regarding projected or estimated investment returns are estimates only and should not be considered indicative of the actual results that may be realized or predictive of future performance. Past results should not be viewed as indicative of future performance.
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