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An Update on ACDC

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The ACDC ETF has recently experienced a rebalance on Friday 20th May. With approximately $500 million in assets under management (AUM), the fund removed 9 stocks and added 6 stocks, reducing the total number of holdings in the fund to 30 from 33. Below is a summary of the 6 stocks that was added to the fund, and the 9 stocks that were removed.

As part of this rebalance, updates to the index were applied. These index changes have been introduced by index provider Solactive to improve aspects of ESG and liquidity in the fund. Details on the Solactive Battery Value Chain Index changes can be seen below:

  1. A Negative ESG screen has been enforced. Any company on the ESG exclusions list will be removed from the index universe. The screen excludes companies based on fossil fuel production, UN Global Compact violations, weapons manufacturing, and tobacco.

  2. A liquidity cap has been introduced, replacing the tiered liquidity system. Previously, the index used arbitrary averaged daily traded value (ADTV) thresholds to determine how much weight a company could take. The new system prevents ETFs tracking the index collectively taking more than 90% of the ADTV of a single company. This is designed to limit potential market impact when ETFs tracking the index rebalance and manage inflows/outflows.

  3. A maximum ownership limit has been added. This prevents ETFs tracking the index from collectively owning more than 7.5% of a company. This prevents potential governance issues, caused when ETFs own a lot of a company’s stock.

  4. The reconstitution frequency has been increased to twice per year. Previously, the fund only reconstituted once in November whilst rebalancing in May and November. Now it reconstitutes in both May and November. In extreme circumstances, the index administrator determines that the index component weight of any index components is greater than 15% on any other review day, then the adjustment day occurs immediately after such review day shall be deemed to be a rebalance day.

ACDC has a modified equal weight approach, due to the Solactive Battery Value Chain Index. As a result, not all underlying holdings have the exact same weighting. This can be seen in the newly added stocks below:

  1. LG Energy Solution (KRX: 373220): The company manufacturers batteries for drones and ships, announced at the beginning of the year plans to build a $2.6 billion battery factory in the US with General Motors. It was recently added because the company spun-off from parent company LG Chem. LG Energy Solution was given a new allocation weighting of 3.9%.

  2. Allkem (ASX: AKE): The company’s strategy is to expand production 3-fold by 2026 and maintain 10% of global lithium production over the next decade. The Olaroz Lithium Factory, located in Northern Argentina, has been producing high-grade lithium carbonate since 2014. Sitting 3,900 meters above sea level, this lithium factory has a very low environmental footprint, utilising solar energy, minimal waste and no impact on fresh water.

  3. Volkswagen (ETR: VOW3): The German based company delivered 99,064 EVs by the end of March, which is a 65% increase compared to the same period the previous year. Volkswagen was given a new allocation weighting of 3.9%.

  4. Largo (NASDAQ: LGO): Engages in the exploration and production of vanadium. The advantages of vanadium batteries versus Lithium batteries include it being non-flammable, non-explosion and have a longer lifespan. Largo was given a new allocation weighting of 0.3% due to new changes in the Solactive Battery Value Chain Index.

  5. Taiwan Cement Corporation (TPE: 1101): Has a subsidiary, E-Moli, Taiwan’s largest lithium battery manufacturer and main supplier of batteries for major European and American high-end home appliance brands. TCC was given a new allocation weighting of 3.9%.

  6. ESS Tech (NYSE: GWH): Provide iron-flow batteries that meet the broadest range of requirements and deliver value where it matters. Those areas of value include, longer duration, low cost, power on demand, safety and environmental sustainability. ESS Tech was given a new allocation weighting of 1.2% due to new changes in the Solactive Battery Value Chain Index.

Below are the 9 stocks that were removed from ACDC, therefore, were given an allocation of 0%:

  1. LG Chem: LG Energy Solution took the place of LG Chem.

  2. Toshiba: It was put on the ESG exclusions list because, it hasn’t established norms around environment, Human Rights, Corruption and Labor Rights.

  3. Brookfield Business Partners: Not in the initial universe.

  4. Brookfield Business Corporation: Not in the initial universe.

  5. Daimler Truck Holdings: Not in the initial universe.

  6. EOS Energy Enterprise: Market capitalisation threshold not met.

  7. Honeywell: It was put on the ESG exclusions list because of its involvement with controversial weapons in the defense sector.

  8. Lockheed Martin: It was put on the ESG exclusions list because of its involvement with controversial weapons in the defense sector.

  9. Rolls Royce: It was put on the ESG exclusions list because of its involvement with controversial weapons in the defense sector.

Click here to learn more about ACDC and gain exposure to the green shift to renewable energy generation. ACDC has an annual management fee of 0.69%, that offers a basket full of companies that produce metals that are primarily used for manufacturing of lithium batteries.