Global X recorded another ETF first on Wednesday, launching a product that offers exposure to the global fishing industry. The Global X Fishing Industry ETF (FISN) seeks to replicate the Solactive Global Fishing Index, a benchmark that includes companies globally that are engaged in commercial fishing, fish farming, fish processing or the marketing and sale of fish and fish products. FISN is the only ETF offering pure play exposure to this unique corner of the market and the second new ETF from Global X this week. Yesterday, the New York-based company debuted a Global Food ETF (EATX).
The fishing industry consists of two primary components:
- Commercial Fishing: Companies engaged in commercial fishing capture fish directly from wild fisheries. Commercial fishing is responsible for more than half of fish supplied through the fishing industry.
- Aquaculture (Fish Farming): Acquaculture, or fish farming, generally involves raising fish commercially in tanks, and has become increasingly important in recent years as surging demand for protein has led to significant overfishing in wild fisheries. Aquaculture accounts for a growing portion of total fish supplies, responsible for meeting much of the growth in demand for fish.
The index underlying FISN consists of about 20 companies listed in eight different countries, including both developed and emerging markets. Norway accounts for more than a third of total holdings, with Japan (23%), Chile (13%) and South Korea (9%) also receiving material allocations. The largest individual holdings in the index include aquaculture industry leader Cermaq ASA (CRMQF.PK) (11%), farmed salmon producer Marine Harvest (MNHVF.PK) (11%), and Japanese firm Toyo Suisan Kaisha (TSUKF.PK) (10%).
Drivers of FISN
Similar to EATX, the new fishing ETF could be poised to benefit from ongoing urbanization and increasing wealth in emerging markets. As urban populations swell and discretionary income rises, protein intake in countries such as China and other developing economies is expected to climb. While local fisherman and small privately held companies could be the biggest beneficiaries of these trends, larger fishing companies are positioned to thrive from an increased customer base as well.
Fishing is a major industry in many emerging markets. By some estimates, more than 500 million people in developing countries depend either directly or indirectly on fisheries and aquaculture. The biggest fish-producing countries include China, Peru, the U.S. and Japan, though the recent earthquake and tsunami have placed additional pressure on an already struggling Japanese fishing industry.
China’s fish consumption has increased at a rate of about 5.7% annually since 1961, according to the Food and Agriculture Organization of the United Nations. Given expectations for global population growth, some 27 million tons of additional fish production will be required by 2030 simply to maintain current levels of per-capita consumption. “Companies that have the infrastructure to supply the rapidly growing demand for fish consumption, from aquaculture facilities to fish processing, are likely to benefit from these demographic and dietary trends,” said CEO of Global X Funds Bruno del Ama.
The global fishing industry can be impacted by a number of regulatory factors. In the EU, battles over policies governing discarded fish have intensified, while fisherman in Norway have expressed concerns over the ramifications of new oil exploration blocks off the country’s coast. In the U.S., plans to build wind turbines in prime fishing grounds have drawn concerns from local fisherman.
Disclosure: No positions at time of writing.
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