Is Gabelli Nextshares Introducing a Pet-Friendly ETF?

Innovations have lately been part and parcel of the ETF industry. The days of plain vanilla ETFs or market-cap weighted ETFs are long gone. In fact, products with winning attributes like low volatility or high dividend are also widespread in the market.  Naturally, issuers have to explore newer and untapped areas. This is where the concept of thematic ETFs starts to bloom (read: Inside the Rise of Thematic ETFs).

There are ETFs dedicated to several corners of the society, generation or culture. So far, thematic funds were targeted at humans but Gabelli Nextshares Trust went a step ahead with its plan to launch a pet-oriented ETF called Gabelli Pet Parent Fund. The ticker code is yet to be disclosed.

Inside the Proposed Fund

The fund looks to track the pet industry. It means that the product will include companies that offer services and products for pets and pet owners. The industry encompasses food, healthcare, veterinary services, pharmaceuticals, wellness, nutrition, equipment, medical and dental supplies and services related to the well-being of pets. The product charges 90 bps in fees.

How Does it Fit in a Portfolio?

The pet food industry has been on the rise. Euromonitor noted that the industry expanded three times more than 1.2% growth noted in the packaged food industry last year. Americans shelled out about $70 billion on their pets in 2017, including health foods and luxury items.

Back in 2013, Americans had spent about $55.7 billion on pet products, as per the American Pet Products Association, quoted on CNBC. The number spiked to $66 billion in 2016 and hit $69.51 billion in 2017. Of this, about $29 billion to $30 billion was shelled out on pet food alone. Now the market expects the industry to see about $72.1 billion in spending this year.

Actually, health consciousness is broad-based among Americans and people are applying this on their pets too. Demand for packaged and processed human foods is falling and food companies are now targeting the budding pet industry to make up for the declines in the human category.

The CNBC article also gave an example that General Mills, renowned for ready-made foods, has announced this year that it would buy the Wilton, Connecticut-based company Blue Buffalo Pet Products for about $8 billion in cash.

The wholesome natural pet food category accounts for only 10% of total category volume, up from 5% five years ago. With millennials considering pets as family members, this market is sure to grow in the coming days (read: Inside the Rise of Thematic ETFs).

Competition

No such product targeting the pet industry is available at present in the market. However, with General Mills planning to foray into this division, the proposed fund may face some threats from the General Mills -heavy funds like PowerShares Dynamic Food and Beverage PBJ and Ivy Focused Value NextShares IVFVC. Overall, the issuer has targeted an unexplored ETF area and is likely to enjoy the first-mover advantage, if approved.

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