Australia finally has a quantum computing ETF. Should you invest?
Australian investors now have access to a quantum computing ETF for the first time.
The VanEck Quantum ETF (ASX: QNTM) listed on the 6th of August alongside two sibling funds covering global semiconductors and rare earths.
Quantum computing is one of the more exciting technology stories of the decade, but it is also one of the least commercially proven.
Both of those things need to be held in mind by investors looking to get exposure to the theme.
What the quantum computing ETF holds
QNTM tracks the MarketVector Quantum Computing Ecosystem Index.
The index targets businesses building quantum hardware, businesses writing quantum software, and the companies supplying components to both.
The third category sets QNTM apart. Thematic funds typically blend a small handful of pure-play developers with much larger technology names that run quantum research programs on the side.
Choosing a more pure exposure to the quantum investing theme arguably makes the fund more investable, because the pure-play cohort is small, unprofitable, and extraordinarily volatile.
But investors expecting a concentrated wager on quantum breakthroughs should read the holdings list before they buy.
That is because almost no company in this space generates material revenue from quantum computing today.
Most of the value in the index is derived from patents, research programs, and expectations on future growth, a bit like the AI theme 10 years ago.
The fee structure
QNTM charges a management fee of 0.65% per year.
For context, broad index funds tracking the Australian market charge a small fraction of that.
As a comparison, the Vanguard Australian Shares Index ETF (ASX: VAS) tracks the S&P/ASX 300 Index (ASX: XKO) and holds roughly 300 companies. Its largest positions include Commonwealth Bank of Australia (ASX: CBA) and BHP Group Ltd (ASX: BHP), businesses that generate cash and pay dividends today.
For all of that blue-chip exposure, Vanguard charges a management fee of just 0.07% per year.
VanEck's two sibling launches are also priced relatively lower.
The VanEck Global Semiconductor ETF (ASX: SMHG) fund charges 0.35%, while the VanEck Rare Earth and Strategic Metals X China ETF (ASX: RESM) charges 0.59%.
It seems that the narrower and more specialised the theme, the more you pay for the privilege.
Should you buy this quantum computing ETF?
There is a reasonable case for a small position,
Quantum computing could eventually reshape cryptography, drug discovery, and materials science.
Nobody can say with any confidence which companies will capture that value, or when.
But an exchange-traded fund is arguably the most sensible way to buy into the theme, because it spreads the bet across several high-potential names.
VanEck has pitched the trio on their thematic appeal, arguing investors increasingly want targeted exposure rather than a loose interpretation of a headline theme.
The risk is that early-stage thematic funds have a habit of attracting money after a theme has already run hard.
For investors looking to get at least some exposure, a sensible structure places a low-cost core at the centre of a portfolio, with a small thematic sleeve around the edges.
Foolish Takeaway
I see the VanEck quantum computing ETF as an interesting product, launched into a market that is increasingly comfortable paying up for narrow exposures.
The Australian ETF industry now holds a record $372 billion across 458 ASX-listed funds, and the number of products keeps climbing.
More choice is generally good news for investors.
If you are drawn to QNTM, size it as the speculative holding it is.
Then let a boring, diversified core do the heavy lifting for your portfolio.
The post Australia finally has a quantum computing ETF. Should you invest? appeared first on The Motley Fool Australia.
Motley Fool contributor Mark Verhoeven has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended BHP Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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