Don’t Miss our Quantum ETF Review

Traditional computers process information in a linear fashion. 

Quantum computers can process the same calculation with different inputs simultaneously (for lack of a better explanation).

That’s why they’re fantastic for cryptography, modeling, and even AI, although they aren’t useful for everyday applications.

Nonetheless, quantum computing could revolutionize the way we see our world, helping us solve issues from biotechnology to fusion power.

We know about the big players like Google and IBM. But who else plays in the area? And more importantly, are any of them investible?

To answer those questions, we turned to our TrackStar data and sought out niche technology ETFs.

And that’s where we found arguably the BEST ETF in the space.

Key Facts About QTUM

• Net assets: $169 million
• 12-month trailing yield: 1.46%
• Inception: September 4, 2018
• Expense ratio: 0.40%
• Number of holdings: 72

QTUM offers access to leading companies in machine learning, quantum computing, cloud computing, and related transformative technologies. 

It tracks the BlueStar Quantum Computing and Machine Learning Index (BQTUM), covering approximately 71 globally-listed stocks of all sizes. The index includes companies involved in the R&D or commercialization of systems and materials used in quantum computing and big data for machine learning. 

So, while the ETF focuses on quantum computing, it’s also got great exposure to AI.

Index components are equally weighted, with adjustments for liquidity, and reviewed semi-annually for reweighting.

Source: VanEck

Source: Defiance ETFs

Performance

The ETF itself hasn’t yet reached the 5-year mark. However, the performance since inception comes pretty close.

Source: Defiance ETFs

The equal weighting rebalance keeps any one stock from helping or hurting the index, leading to lower volatility in a fairly volatile group of stocks.

Competition

As the Quantum Computing niche is unique in and of itself, we compared it to other top niche technology ETFs:

• First Trust NASDAQ CEA Cybersecurity ETF (CIBR): CIBR tracks an index of companies engaged in the cybersecurity segment of the tech and industrial sectors, only taking those with a >$250M market cap.
• iShares Expanded Tech-Software Sector ETF (IGV): IGV targets a benchmark composed of primarily mid-cap U.S. software companies, including top holdings like Oracle, Microsoft, and Adobe. 
• First Trust ISE Cloud Computing Index Fund (SKYY): SKYY is first ETF focused on the cloud computing industry, holding small pure play cloud companies and larger firms with diverse operations.
• iShares U.S. Tech Breakthrough Multisector ETF (TECB): This ETF focuses on firms leading in innovation, research, and development within fields such as robotics and artificial intelligence, cybersecurity, cloud and data technologies, financial tech, and genomics and immunology.

CIBR runs an expense ratio double the others and has the fewest stocks in its portfolio.

iShares ETFs hold more stocks with lower expense ratios but don’t have the greatest overall performance.

QTUM has the best return by a mile but doesn’t have high liquidity or assets under management.

So, with each ETF, there are certainly some tradeoffs to consider.

Our Opinion 5/10 

While we like the idea and performance of QTUM, the low volume and total assets under management make us nervous.

Ideally, we want to see at least half a billion dollars under management and 50,000 shares traded daily.

Otherwise, liquidity can become a problem.

That said, there aren’t any other options we’re aware of. So, if you absolutely must have quantum computing in your portfolio, this is your avenue.

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