Making Healthy Relationship Investments

The Rise of the FinTech Index

“Hey, I know we’ve only just met but let’s get married?

“Do you believe in love at first sight?

“How can we take our relationship to the next level?”

 

These are examples of cheesy chat up lines or tricky questions that most of us have faced or even asked! Sweaty palms, elevated heart rate, resembling a deer caught in the headlights – yes, these are common responses to these types of questions!

I’m sure most of us, including the more analytically minded, would not reply – “hmm,…lets create an index to help answer that.”

This seems to have been the US’s response when they looked at their relationship with FinTechs.

Last month we saw the launch of a FinTech focused index in the US by Keefe Bruyette & Woods (KBW) and Nasdaq. Creatively (!) named the KBW Nasdaq Financial Technology Index (Ticker: KFTX), the index tracks the performance of a selection of US FinTech companies to provide investors with an index based view.

In true FinTech style, the index breaks away from the norm in regards to its listed company structure. Nasdaq 100, Fortune 500, FTSE 100, CAC 40 – I’m sure you agree these are sensible and simple names that make it super easy to understand how many companies are listed – right? 100 companies, 500 companies….

Well, not for this Index! The KBW Nasdaq Financial Technology Index lists… wait for it… 49 companies – the KFTX49 has a slightly odd ring to it!

At its launch, the 49 FinTech companies included in the Index represented roughly one-fifth (18%) of the investable domestic financial universe and nearly 4% of the investable domestic equity universe to account for approximately $785 billion in total market cap. So a pretty big number!

 

The 49 companies included in the Index are:

  1. ACI Worldwide, Inc. (ACIW)
  2. Alliance Data Systems Corp. (ADS)
  3. American Express Co. (AXP)
  4. Bankrate, Inc. (RATE)
  5. Black Knight Financial Services, Inc. (BKFS)
  6. Blackhawk Network Holdings, Inc. (HAWK)
  7. BofI Holding, Inc. (BOFI)
  8. Broadridge Financial Solutions, Inc. (BR)
  9. Cardtronics, Inc. (CATM)
  10. CBOE Holdings, Inc. (CBOE)
  11. CME Group, Inc. (CME)
  12. CoreLogic, Inc. (CLGX)
  13. Dun & Bradstreet Corp. (DNB)
  14. Envestnet, Inc. (ENV)
  15. Equifax, Inc. (EFX)
  16. Euronet Worldwide, Inc. (EEFT)
  17. EverBank Financial Corp. (EVER)
  18. EVERTEC, Inc. (EVTC)
  19. FactSet Research Systems Inc. (FDS)
  20. Fair Isaac Corp. (FICO)
  21. Fidelity National Information Services, Inc. (FIS)
  22. First Data Corp. (FDC)
  23. Fiserv, Inc. (FISV)
  24. FleetCor Technologies, Inc. (FLT)
  25. Global Payments, Inc. (GPN)
  26. Green Dot Corp. (GDOT)
  27. Intercontinental Exchange, Inc. (ICE)
  28. IHS Markit Ltd. (INFO)
  29. Jack Henry & Associates, Inc. (JKHY)
  30. LendingClub Corp. (LC)
  31. MarketAxess Holdings, Inc. (MKTX)
  32. MasterCard, Inc. (MA)
  33. Moody’s Corp. (MCO)
  34. MSCI, Inc. (MSCI)
  35. Nasdaq, Inc. (NDAQ)
  36. PayPal Holdings, Inc. (PYPL)
  37. S&P Global, Inc. (SPGI)
  38. SEI Investments Co. (SEIC)
  39. Square, Inc. (SQ)
  40. SS&C Technologies Holdings, Inc. (SSNC)
  41. The Western Union Co. (WU)
  42. Thomson Reuters Corp. (TRI)
  43. Total System Services, Inc. (TSS)
  44. Vantiv, Inc. (VNTV)
  45. VeriFone Systems, Inc. (PAY)
  46. Verisk Analytics, Inc. (VRSK)
  47. Virtu Financial, Inc. (VIRT)
  48. Visa, Inc. (V)
  49. WEX, Inc. (WEX).

 

These companies have been included as the index is intended to serve as the benchmark for investors interested in companies that leverage technology to deliver financial products and services. So a pretty broad scope.

The index will apparently be rebalanced quarterly and members will be updated annually (on the third Friday in December). It will be very interesting to see who is added and removed!

I would expect to see the like of the Lending Club disappear – a business that is going through some very turbulent times.

With investor interest in FinTechs as an alternative investment vehicle expected to grow, we anticipate that more FinTech focused indexes will emerge.

 

 

shares