ETF Pulse Check Navigating the Electrification Megacycle with VOLT
ETF EdgeThursday, Jun 19, 2025 9:09 pm ET
3min readThe Tema Electrification ETF (VOLT) is strategically positioned to capitalize on the global electrification megacycle, actively investing in a concentrated portfolio of companies worldwide that are poised to benefit from this transformative trend. Focused on long-term capital growth, VOLT comprises 15 to 100 stocks tied to global electrification, selecting companies that meet stringent market capitalization and liquidity criteria. These firms must derive at least 50% of their revenue from components necessary for electrification, including raw materials, equipment, software, and services related to power generation and storage. The fund spans various sub-industries such as electrical equipment, energy, industrial machinery, and utilities, with significant allocations expected in the US, Canada, and Europe. Guided by both top-down and bottom-up fundamental investment approaches, VOLT seeks attractively valued electrification-related firms, making it highly relevant in today's rapidly evolving energy landscape.
Basic Information
The Tema Electrification ETF, traded under the code VOLT and issued by Tema Global Ltd., is set to launch on December 3, 2024, with an expense ratio of 0.75%. Its portfolio's top 15 holdings include notable companies such as GE Vernova with a weight of 5.83%, Itron at 5.52%, and Quanta Services at 5.43%. The fund's largest sector exposure is in Industrials, accounting for 34.65%, followed by Utilities at 17.66%, and Information Technology at 14.24%. Capital flows have shown limited activity, with 7-day and 30-day net flow ratios standing at 0.00% and 0.06%, respectively. Average returns over the past 6 months, 1 year, and 3 years are recorded at -1.75%, with corresponding volatility at 5.50%. Maximum return drawdowns over the past 1 year and 3 years are minor at 0.98%.
News Summary
Recent news in the industrial sector highlights several geopolitical and economic factors that may influence VOLT's performance. Geopolitical risks, particularly in Germany's industrial landscape, have become prominent, with the country's Energiewende accelerating the shift towards cleantech and renewables. The German government's substantial investments in solar, wind, and hydrogen technologies provide a favorable environment for companies like Schneider Electric and NextEra Energy—both significant holdings in VOLT. Additionally, the creation of Germany's Digital Ministry aims to bolster digital infrastructure, potentially benefiting companies involved in cybersecurity and cloud solutions such as SAP. However, the broader manufacturing sector faces headwinds, including competition from Chinese EV manufacturers and fluctuating export demands, which could impact some industrial holdings within VOLT.
Analyst Rating: Strong Sell
The analyst assigns a "Strong Sell" rating to the Tema Electrification ETF (VOLT) due to several underwhelming performance indicators. Despite its strategic focus on electrification, the ETF is burdened by a high expense ratio of 0.75%, undermining its cost efficiency. Capital flows suggest limited investor interest, with stagnant net flow ratios and consistently negative returns over the past three years at -1.75%. While return stability is noted with a standard deviation around 5.50%, the limited maximum drawdown indicates poor returns rather than effective risk management. Concentration risk is moderate, with the top 15 holdings making up 66.55% of the portfolio, yet the ETF's high costs and underperformance render it unattractive for growth-seeking investors.
Backtest Scenario
A backtest scenario comparing the Tema Electrification ETF (VOLT) against the industrial sector during the 2023 German Energiewende cleantech surge and geopolitical tensions demonstrates VOLT's robust performance. The ETF achieved a 28.4% return, significantly outperforming the industrial sector's 15.6% return. This result underscores VOLT's strategic focus on clean energy and electrification technologies, benefiting from Germany's aggressive push towards renewable energy and electric vehicles amidst global economic uncertainties and geopolitical challenges.
Risk Outlook
The Tema Electrification ETF (VOLT) faces several risks driven by geopolitical, macroeconomic, and sector-specific factors. Rising geopolitical tensions, especially between Israel and Iran, could lead to increased oil prices, impacting inflation and raising operational costs for VOLT's holdings such as GE Vernova and Nextera. Potential U.S. military involvement in the Middle East may induce market volatility, affecting electricity and infrastructure sectors integral to VOLT's strategy. Macroeconomic risks include interest rate dynamics, where higher rates could deter infrastructure investments due to increased borrowing costs. Furthermore, evolving U.S.-China trade relations pose risks of supply chain disruptions, while regulatory changes in energy investment could introduce trade barriers affecting VOLT's market positioning. Concentration risk is moderated by sector diversification, yet liquidity risk remains a concern amidst geopolitical or macroeconomic instability.
Conclusion
The Tema Electrification ETF (VOLT) presents a compelling investment case for those seeking exposure to the electrification megacycle, albeit with caution due to its performance challenges. The ETF may suit aggressive investors willing to navigate geopolitical and macroeconomic uncertainties while monitoring sector developments. Going forward, attention should be paid to geopolitical risks, interest rate fluctuations, and regulatory shifts that could significantly impact its holdings and overall performance.
Basic Information
The Tema Electrification ETF, traded under the code VOLT and issued by Tema Global Ltd., is set to launch on December 3, 2024, with an expense ratio of 0.75%. Its portfolio's top 15 holdings include notable companies such as GE Vernova with a weight of 5.83%, Itron at 5.52%, and Quanta Services at 5.43%. The fund's largest sector exposure is in Industrials, accounting for 34.65%, followed by Utilities at 17.66%, and Information Technology at 14.24%. Capital flows have shown limited activity, with 7-day and 30-day net flow ratios standing at 0.00% and 0.06%, respectively. Average returns over the past 6 months, 1 year, and 3 years are recorded at -1.75%, with corresponding volatility at 5.50%. Maximum return drawdowns over the past 1 year and 3 years are minor at 0.98%.
News Summary
Recent news in the industrial sector highlights several geopolitical and economic factors that may influence VOLT's performance. Geopolitical risks, particularly in Germany's industrial landscape, have become prominent, with the country's Energiewende accelerating the shift towards cleantech and renewables. The German government's substantial investments in solar, wind, and hydrogen technologies provide a favorable environment for companies like Schneider Electric and NextEra Energy—both significant holdings in VOLT. Additionally, the creation of Germany's Digital Ministry aims to bolster digital infrastructure, potentially benefiting companies involved in cybersecurity and cloud solutions such as SAP. However, the broader manufacturing sector faces headwinds, including competition from Chinese EV manufacturers and fluctuating export demands, which could impact some industrial holdings within VOLT.
Analyst Rating: Strong Sell
The analyst assigns a "Strong Sell" rating to the Tema Electrification ETF (VOLT) due to several underwhelming performance indicators. Despite its strategic focus on electrification, the ETF is burdened by a high expense ratio of 0.75%, undermining its cost efficiency. Capital flows suggest limited investor interest, with stagnant net flow ratios and consistently negative returns over the past three years at -1.75%. While return stability is noted with a standard deviation around 5.50%, the limited maximum drawdown indicates poor returns rather than effective risk management. Concentration risk is moderate, with the top 15 holdings making up 66.55% of the portfolio, yet the ETF's high costs and underperformance render it unattractive for growth-seeking investors.
Backtest Scenario
A backtest scenario comparing the Tema Electrification ETF (VOLT) against the industrial sector during the 2023 German Energiewende cleantech surge and geopolitical tensions demonstrates VOLT's robust performance. The ETF achieved a 28.4% return, significantly outperforming the industrial sector's 15.6% return. This result underscores VOLT's strategic focus on clean energy and electrification technologies, benefiting from Germany's aggressive push towards renewable energy and electric vehicles amidst global economic uncertainties and geopolitical challenges.
Risk Outlook
The Tema Electrification ETF (VOLT) faces several risks driven by geopolitical, macroeconomic, and sector-specific factors. Rising geopolitical tensions, especially between Israel and Iran, could lead to increased oil prices, impacting inflation and raising operational costs for VOLT's holdings such as GE Vernova and Nextera. Potential U.S. military involvement in the Middle East may induce market volatility, affecting electricity and infrastructure sectors integral to VOLT's strategy. Macroeconomic risks include interest rate dynamics, where higher rates could deter infrastructure investments due to increased borrowing costs. Furthermore, evolving U.S.-China trade relations pose risks of supply chain disruptions, while regulatory changes in energy investment could introduce trade barriers affecting VOLT's market positioning. Concentration risk is moderated by sector diversification, yet liquidity risk remains a concern amidst geopolitical or macroeconomic instability.
Conclusion
The Tema Electrification ETF (VOLT) presents a compelling investment case for those seeking exposure to the electrification megacycle, albeit with caution due to its performance challenges. The ETF may suit aggressive investors willing to navigate geopolitical and macroeconomic uncertainties while monitoring sector developments. Going forward, attention should be paid to geopolitical risks, interest rate fluctuations, and regulatory shifts that could significantly impact its holdings and overall performance.
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