Correspondence 0001432353-23-000276 from Global X Funds (CIK 0001432353)
Global X Funds (CIK 0001432353)
Date: March 10, 2023 · CIK: 0001432353 · Accession: 0001432353-23-000276
AI Filing Summary & Sentiment
File numbers found in text: 333-151713, 811-22209
Letter
VIA EDGAR Division of Investment Management Washington, D.C. 20549-9303 Attention: Karen Rossotto, Esq. Re: Global X Funds File No. 333-151713, 811-22209
Dear Ms. Rossotto:
On behalf of Global X Funds (the “Registrant” or the “Trust”) and its series, the Global X PropTech ETF (the “Fund”), included in Post-Effective Amendment No. 698 (the “Amendment”) to the Registrant’s registration statement on Form N-1A (the “Registration Statement”), below you will find the Registrant’s responses to the comments that you had conveyed to the undersigned on January 31, 2023 with regard to the Amendment. The Amendment was filed with the U.S. Securities and Exchange Commission (the “SEC”) on December 13, 2022, pursuant to the Investment Company Act of 1940, as amended (the "1940 Act"), and Rule 485(a)(2) under the Securities Act of 1933, as amended (the “Securities Act”).
Below we have summarized your comments, in italics, and presented the Registrant’s response to each comment. Capitalized terms not otherwise defined in this letter have the meanings assigned to the terms in the Registration Statement.
PRINCIPAL INVESTMENT STRATEGIES
1. Comment: With respect to the section of the Fund’s Prospectus titled “PRINCIPAL INVESTMENT STRATEGIES”, please clarify in the disclosure the meaning of the following sentence: “Solely for the purposes of complying with this policy, the Fund views securities issued by PropTech Companies only (as defined below) as satisfying this criterion."
Response: The Registrant has removed the sentence from the section of the Fund’s Prospectus titled “PRINCIPAL INVESTMENT STRATEGIES”, as shown below:
Solely for the purposes of complying with this policy, the Fund views securities issued by PropTech Companies only (as defined below) as satisfying this criterion.
U.S. Securities and Exchange Commission
Attention: Karen Rossotto, Esq.
March 10, 2023
Page 2
2. Comment: Please confirm to the Staff in correspondence that the Fund will satisfy the Rule 35d-1 requirements with respect to PropTech companies by investing at least 80% of its net assets, plus borrowings for investment purposes (if any), in the securities of the Underlying Index.
Response: The Adviser believes that the Fund satisfies the requirements of Rule 35d-1 by investing at least 80% of its net assets, plus borrowings for investment purposes (if any), in the securities of the Underlying Index. Section 35(d) of the 1940 Act prohibits a registered investment company from adopting a name that includes words that the SEC deems materially deceptive or misleading. The SEC adopted Rule 35d-1 in an effort to protect investors against misleading or deceptive fund names. Rule 35d-1 provides, in part, that when a fund’s name suggests that it focuses in a particular industry, the fund must adopt a policy to invest, under normal market conditions, at least 80% of the fund’s net assets in the industry suggested by its name. The Adviser confirms that the Fund’s investment strategy meets the requirements of Rule 35d-1 because the Fund’s Underlying Index is composed of securities that are consistent with the types of investments suggested by the Fund’s name and the Fund has a policy to invest at least 80% of its assets in the securities included in the Underlying Index.
3. Comment: With respect to the third paragraph in the section of the Fund’s Prospectus titled “PRINCIPAL INVESTMENT STRATEGIES”, please specify what FactSet Industries are classified as PropTech.
Response: The Registrant notes that the identification of FactSet Industries related to PropTech is a first step in the selection process for the Underlying Index and may include a broad and evolving list of industries. The Registrant notes that the companies within these FactSet Industries are further reviewed by the Index Administrator to determine whether such company meets the revenue test described in the section of the Fund’s Prospectus titled “PRINCIPAL INVESTMENT STRATEGIES”.
4. Comment: Please provide the Staff supplementally with a model portfolio identifying the top 10 Underlying Index constituents, including each company’s name, market capitalization, country of risk and a brief explanation of why the company is considered a PropTech Company.
Response: Please find the attached requested information.
5. Comment: With respect to the third and fourth paragraphs in the section of the Fund’s Prospectus titled “PRINCIPAL INVESTMENT STRATEGIES”, please specify whether all issuers that meet the market capitalization requirement and liquidity requirement are included in the Underlying Index. Please specify whether an issuer could meet these criteria but still be excluded from the Underlying Index. If so, please discuss on what basis an issuer may be excluded from the Underlying Index.
Response: All issuers that meet the market capitalization and liquidity requirements, in addition to all of the other requirements for inclusion in the Underlying Index (e.g. country of listing, classification as a PropTech Company based on identified revenue exposure, etc.) are included in the Underlying Index. If more than 50 issuers meet all of the criteria for the Underlying Index, then the largest 50 issuers by market capitalization that meet all of the criteria will be included in the Underlying Index.
6. Comment: Please provide all missing or bracketed information from the 485(a) filing with the response letter to these comments prior to the effectiveness of the Registration Statement.
Response: Please find the attached requested revised Registration Statement.
U.S. Securities and Exchange Commission
Attention: Karen Rossotto, Esq.
March 10, 2023
Page 3
7. Comment: With respect to the fifth paragraph in the section of the Fund’s Prospectus titled “PRINCIPAL INVESTMENT STRATEGIES”, in light of the fact that the Fund is classified as non-diversified under the 1940 Act, please replace the word “diversification” to avoid confusion.
Response: The Registrant has updated the section of the Fund’s Prospectus titled “PRINCIPAL INVESTMENT STRATEGIES” as follows:
During each rebalance, the maximum weight of a company is capped at [8]% , and all constituents are subject to a minimum weight of [ ]%. Generally speaking, modified capitalization weighting will limit the amount of concentration in the largest market capitalization companies and increase company-level diversification. The Underlying Index may include large-, mid- or small-capitalization companies, and components primarily include [information technology] and [ ] companies. As of [ ], 2023, the Underlying Index had [37] constituents. The Fund's investment objective and Underlying Index may be changed without shareholder approval.
8. Comment: With respect to the sixth paragraph in the section of the Fund’s Prospectus titled “PRINCIPAL INVESTMENT STRATEGIES”, the Staff notes that the disclosure states that “[a]ny determinations related to the constituents of the Underlying Index are made by the Index Administrator . . .”. Please elaborate on this disclosure and explain to the Staff how this is not considered active management. In addition, please disclose the rules-based methodology by which constituents are included in the Underlying Index and supplementally provide the Staff with a copy of the Underlying Index methodology.
Response: While the Underlying Index is created and sponsored by the Index Provider, all determinations related to the application of the methodology of the Underlying Index, including the selection of the Underlying Index constituents, are made by the Index Administrator and are independent of the Fund's Index Provider. The Index Administrator seeks to maintain the Underlying Index in accordance with the criteria outlined in the Underlying Index methodology. The Registrant has provided a copy of the methodology for the Underlying Index in response to Comment #4 above.
9. Comment: With respect to the last paragraph in the section of the Fund’s Prospectus titled “PRINCIPAL INVESTMENT STRATEGIES”, please inform the Staff why the Fund may rely on the no-action relief provided in The First Australia Fund, Inc. letter in light of the fact that the Index Provider is an affiliate of the Fund.
Response: As a preliminary matter, the Registrant notes that Section 8(b)(1) under the 1940 Act requires each registered investment company to include in its registration statement ”a recital of the policy of the registrant in respect of” certain enumerated policies, including concentration of investments and that such a recital include “a statement whether the registrant reserves freedom of action to engage in activities of such type, and if such freedom of action is reserved, a statement briefly indicating, insofar as is practicable, the extent to which the registrant intends to engage therein.” The First Australia Fund no action letter provides the Staff’s interpretive position concurring that the proposed approach set forth in that letter was consistent with the statutory scope of Section 8(b)(1). The Registrant respectfully submits that the First Australia Fund provides one, fact-limited example of an approach that satisfies the statutory provision of Section 8(b)(1), but does not provide an exclusive method of complying with the requirements of the statute.
U.S. Securities and Exchange Commission
Attention: Karen Rossotto, Esq.
March 10, 2023
Page 4
We note some significant differences between the Fund and the fund at issue in First Australia. The fund at issue in the First Australia letter was actively managed. The fund’s manager retained significant discretion to invest up to 35% of the fund’s total assets in the securities of issuers in a particular industry if and when that industry represented 20% or more of a reference index. Moreover, the fund discussed in First Australia letter was not an index fund, much less an index ETF, and therefore the fund’s investment adviser had no mandate (and the fund did not have an investment objective) to track the performance of the reference index. Indeed, the investment adviser in First Australia Fund, Inc. presumably had the discretion to change reference indexes at will, unlike an index ETF for which a change in the underlying index would typically require a change to a fund’s investment objective (as would be the case for the Fund).
In light of the foregoing, the Registrant submits that the First Australia letter although informative, is not controlling and does not set aside the express statutory provisions of Section 8(b)(1).
10. Comment: With respect to the last paragraph in the section of the Fund’s Prospectus titled “PRINCIPAL INVESTMENT STRATEGIES”, the Staff notes that the Fund will be concentrated in the entertainment industry but not in the real estate industry. Please explain why this concentration is consistent with the Fund’s principal investment strategy.
Response: The Fund does not expect be concentrated in the entertainment industry. The Registrant has updated the section of the Fund’s Prospectus titled “PRINCIPAL INVESTMENT STRATEGIES” as shown below:
As of [ ], 2023, the Underlying Index was concentrated in the information technology sector and had significant exposure to the software industry.
As stated in the last paragraph of the section of the Fund’s Prospectus titled “PRINCIPAL INVESTMENT STRATEGIES”, for an investment to be considered concentrated, it must hold more than 25% of its total assets in the respective sector and/or industry. Based on the current composition of the Underlying Index, the real estate sector does not currently meet this criteria. However, while not stated in the Prospectus, the second highest sector concentration falls in the real estate sector, and the associated real estate management & development industry. As the Underlying Index is designed to provide exposure to property technology, the Registrant believes that the concentration in the information technology sector and the software industry is appropriate and reflects companies that are utilizing technology for purposes as defined in the Prospectus.
11. Comment: Please confirm whether the Fund will invest in unsponsored depositary receipts as part of its principal investment strategy. If so, please update the section of the Fund’s Prospectus titled “SUMMARY OF PRINCIPAL RISKS” accordingly.
Response: The Registrant confirms that it is not expected for the Fund to invest in unsponsored depositary receipts as part of its principal investment strategy.
12. Comment: Please update the section of the Fund’s Prospectus titled “PRINCIPAL INVESTMENT STRATEGIES” to define the Underlying Index’s definition of an emerging market country.
U.S. Securities and Exchange Commission
Attention: Karen Rossotto, Esq.
March 10, 2023
Page 5
Response: The Registrant notes that the section of the Fund’s Prospectus titled “PRINCIPAL INVESTMENT STRATEGIES” provides a list of countries that are eligible for inclusion in the Underlying Index and believes that the current disclosure is appropriate.
SUMMARY OF PRINCIPAL RISKS
13. Comment: Please revise the section of the Fund’s Prospectus titled “PRINCIPAL INVESTMENT STRATEGIES”, to disclose the types of equity securities in which the Fund will invest. In addition, please update the risk factor titled “Asset Class Risk – Equity Securities Risk” in the section of the Fund’s Prospectus titled “SUMMARY OF PRINCIPAL RISKS” to include risks associated with each type of equity security.
Response: The Registrant has updated the section of the Fund’s Prospectus titled “PRINCIPAL INVESTMENT STRATEGIES” as follows:
The Fund invests at least 80% of its net assets, plus borrowings for investments purposes (if any), in the securities of the Global X PropTech Index (the "Underlying Index"), and in which may include common stocks, American Depositary Receipts ("ADRs") and Global Depositary Receipts ("GDRs"), based on the securities in the Underlying Index.
14. Comment: Regarding the disclosure in the section of the Fund's Prospectus titled "PURCHASE AND SALE OF FUND SHARES" on page 9, to the extent applicable, please disclose that purchases and redemptions of creation units primarily with cash, rather than through in‐kind delivery of portfolio securities, may cause the Fund to incur certain costs. Please also disclose that these costs could include brokerage costs or taxable gains or losses that it might not have incurred if it had made redemption in‐kind. In addition, please disclose that these costs could be imposed on the Fund, and thus decrease the Fund’s net asset value, to the extent that the costs are not offset by a transaction fee payable by an authorized participant.
Response: The Registrant notes that the section of the Fund’s Prospectus titled “SUMMARY OF PRINCIPAL RISKS” includes the risk factor titled “Cash Transaction Risk”, which the Registrant believes addresses the Staff's comment.
15. Comment: With respect to the risk factor titled “Focus Risk” in the section of the Fund’s Prospectus titled “SUMMARY OF PRINCIPAL RISKS”, please tailor the disclosure to reflect the Fund’s principal investment strategy.
Response: Please see the Registrant’s response to Comment #10 above.
16. Comment: With respect to the risk factor titled “Geographic Economic Exposure Risk – Asian Economic Risk” in the section of the Fund’s Prospectus titled “SUMMARY OF PRINCIPAL RISKS”, the Staff notes that the disclosure refers to historical tensions between North Korea and South Korea. Please consider whether there are other flash points that present similar risks.
Response: The Registrant has revised the section of the Fund’s Prospectus titled “SUMMARY OF PRINCIPAL RISKS – Geographic Economic Exposure Risk – Asian Economic Risk” as shown below:
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Global X Funds
605 Third Avenue, 43rd Floor
New York, NY 10158
March 10, 2023
VIA EDGAR
U.S. Securities and Exchange Commission
Division of Investment Management
100 F Street, N.E.
Washington, D.C. 20549-9303
Attention: Karen Rossotto, Esq.
Re: Global X Funds
File No. 333-151713, 811-22209
Dear Ms. Rossotto:
On behalf of Global X Funds (the “Registrant” or the “Trust”) and its series, the Global X PropTech ETF (the “Fund”), included in Post-Effective Amendment No. 698 (the “Amendment”) to the Registrant’s registration statement on Form N-1A (the “Registration Statement”), below you will find the Registrant’s responses to the comments that you had conveyed to the undersigned on January 31, 2023 with regard to the Amendment. The Amendment was filed with the U.S. Securities and Exchange Commission (the “SEC”) on December 13, 2022, pursuant to the Investment Company Act of 1940, as amended (the "1940 Act"), and Rule 485(a)(2) under the Securities Act of 1933, as amended (the “Securities Act”).
Below we have summarized your comments, in italics, and presented the Registrant’s response to each comment. Capitalized terms not otherwise defined in this letter have the meanings assigned to the terms in the Registration Statement.
PRINCIPAL INVESTMENT STRATEGIES
1. Comment: With respect to the section of the Fund’s Prospectus titled “PRINCIPAL INVESTMENT STRATEGIES”, please clarify in the disclosure the meaning of the following sentence: “Solely for the purposes of complying with this policy, the Fund views securities issued by PropTech Companies only (as defined below) as satisfying this criterion."
Response: The Registrant has removed the sentence from the section of the Fund’s Prospectus titled “PRINCIPAL INVESTMENT STRATEGIES”, as shown below:
Solely for the purposes of complying with this policy, the Fund views securities issued by PropTech Companies only (as defined below) as satisfying this criterion.
U.S. Securities and Exchange Commission
Attention: Karen Rossotto, Esq.
March 10, 2023
Page 2
2. Comment: Please confirm to the Staff in correspondence that the Fund will satisfy the Rule 35d-1 requirements with respect to PropTech companies by investing at least 80% of its net assets, plus borrowings for investment purposes (if any), in the securities of the Underlying Index.
Response: The Adviser believes that the Fund satisfies the requirements of Rule 35d-1 by investing at least 80% of its net assets, plus borrowings for investment purposes (if any), in the securities of the Underlying Index. Section 35(d) of the 1940 Act prohibits a registered investment company from adopting a name that includes words that the SEC deems materially deceptive or misleading. The SEC adopted Rule 35d-1 in an effort to protect investors against misleading or deceptive fund names. Rule 35d-1 provides, in part, that when a fund’s name suggests that it focuses in a particular industry, the fund must adopt a policy to invest, under normal market conditions, at least 80% of the fund’s net assets in the industry suggested by its name. The Adviser confirms that the Fund’s investment strategy meets the requirements of Rule 35d-1 because the Fund’s Underlying Index is composed of securities that are consistent with the types of investments suggested by the Fund’s name and the Fund has a policy to invest at least 80% of its assets in the securities included in the Underlying Index.
3. Comment: With respect to the third paragraph in the section of the Fund’s Prospectus titled “PRINCIPAL INVESTMENT STRATEGIES”, please specify what FactSet Industries are classified as PropTech.
Response: The Registrant notes that the identification of FactSet Industries related to PropTech is a first step in the selection process for the Underlying Index and may include a broad and evolving list of industries. The Registrant notes that the companies within these FactSet Industries are further reviewed by the Index Administrator to determine whether such company meets the revenue test described in the section of the Fund’s Prospectus titled “PRINCIPAL INVESTMENT STRATEGIES”.
4. Comment: Please provide the Staff supplementally with a model portfolio identifying the top 10 Underlying Index constituents, including each company’s name, market capitalization, country of risk and a brief explanation of why the company is considered a PropTech Company.
Response: Please find the attached requested information.
5. Comment: With respect to the third and fourth paragraphs in the section of the Fund’s Prospectus titled “PRINCIPAL INVESTMENT STRATEGIES”, please specify whether all issuers that meet the market capitalization requirement and liquidity requirement are included in the Underlying Index. Please specify whether an issuer could meet these criteria but still be excluded from the Underlying Index. If so, please discuss on what basis an issuer may be excluded from the Underlying Index.
Response: All issuers that meet the market capitalization and liquidity requirements, in addition to all of the other requirements for inclusion in the Underlying Index (e.g. country of listing, classification as a PropTech Company based on identified revenue exposure, etc.) are included in the Underlying Index. If more than 50 issuers meet all of the criteria for the Underlying Index, then the largest 50 issuers by market capitalization that meet all of the criteria will be included in the Underlying Index.
6. Comment: Please provide all missing or bracketed information from the 485(a) filing with the response letter to these comments prior to the effectiveness of the Registration Statement.
Response: Please find the attached requested revised Registration Statement.
U.S. Securities and Exchange Commission
Attention: Karen Rossotto, Esq.
March 10, 2023
Page 3
7. Comment: With respect to the fifth paragraph in the section of the Fund’s Prospectus titled “PRINCIPAL INVESTMENT STRATEGIES”, in light of the fact that the Fund is classified as non-diversified under the 1940 Act, please replace the word “diversification” to avoid confusion.
Response: The Registrant has updated the section of the Fund’s Prospectus titled “PRINCIPAL INVESTMENT STRATEGIES” as follows:
During each rebalance, the maximum weight of a company is capped at [8]% , and all constituents are subject to a minimum weight of [ ]%. Generally speaking, modified capitalization weighting will limit the amount of concentration in the largest market capitalization companies and increase company-level diversification. The Underlying Index may include large-, mid- or small-capitalization companies, and components primarily include [information technology] and [ ] companies. As of [ ], 2023, the Underlying Index had [37] constituents. The Fund's investment objective and Underlying Index may be changed without shareholder approval.
8. Comment: With respect to the sixth paragraph in the section of the Fund’s Prospectus titled “PRINCIPAL INVESTMENT STRATEGIES”, the Staff notes that the disclosure states that “[a]ny determinations related to the constituents of the Underlying Index are made by the Index Administrator . . .”. Please elaborate on this disclosure and explain to the Staff how this is not considered active management. In addition, please disclose the rules-based methodology by which constituents are included in the Underlying Index and supplementally provide the Staff with a copy of the Underlying Index methodology.
Response: While the Underlying Index is created and sponsored by the Index Provider, all determinations related to the application of the methodology of the Underlying Index, including the selection of the Underlying Index constituents, are made by the Index Administrator and are independent of the Fund's Index Provider. The Index Administrator seeks to maintain the Underlying Index in accordance with the criteria outlined in the Underlying Index methodology. The Registrant has provided a copy of the methodology for the Underlying Index in response to Comment #4 above.
9. Comment: With respect to the last paragraph in the section of the Fund’s Prospectus titled “PRINCIPAL INVESTMENT STRATEGIES”, please inform the Staff why the Fund may rely on the no-action relief provided in The First Australia Fund, Inc. letter in light of the fact that the Index Provider is an affiliate of the Fund.
Response: As a preliminary matter, the Registrant notes that Section 8(b)(1) under the 1940 Act requires each registered investment company to include in its registration statement ”a recital of the policy of the registrant in respect of” certain enumerated policies, including concentration of investments and that such a recital include “a statement whether the registrant reserves freedom of action to engage in activities of such type, and if such freedom of action is reserved, a statement briefly indicating, insofar as is practicable, the extent to which the registrant intends to engage therein.” The First Australia Fund no action letter provides the Staff’s interpretive position concurring that the proposed approach set forth in that letter was consistent with the statutory scope of Section 8(b)(1). The Registrant respectfully submits that the First Australia Fund provides one, fact-limited example of an approach that satisfies the statutory provision of Section 8(b)(1), but does not provide an exclusive method of complying with the requirements of the statute.
U.S. Securities and Exchange Commission
Attention: Karen Rossotto, Esq.
March 10, 2023
Page 4
We note some significant differences between the Fund and the fund at issue in First Australia. The fund at issue in the First Australia letter was actively managed. The fund’s manager retained significant discretion to invest up to 35% of the fund’s total assets in the securities of issuers in a particular industry if and when that industry represented 20% or more of a reference index. Moreover, the fund discussed in First Australia letter was not an index fund, much less an index ETF, and therefore the fund’s investment adviser had no mandate (and the fund did not have an investment objective) to track the performance of the reference index. Indeed, the investment adviser in First Australia Fund, Inc. presumably had the discretion to change reference indexes at will, unlike an index ETF for which a change in the underlying index would typically require a change to a fund’s investment objective (as would be the case for the Fund).
In light of the foregoing, the Registrant submits that the First Australia letter although informative, is not controlling and does not set aside the express statutory provisions of Section 8(b)(1).
10. Comment: With respect to the last paragraph in the section of the Fund’s Prospectus titled “PRINCIPAL INVESTMENT STRATEGIES”, the Staff notes that the Fund will be concentrated in the entertainment industry but not in the real estate industry. Please explain why this concentration is consistent with the Fund’s principal investment strategy.
Response: The Fund does not expect be concentrated in the entertainment industry. The Registrant has updated the section of the Fund’s Prospectus titled “PRINCIPAL INVESTMENT STRATEGIES” as shown below:
As of [ ], 2023, the Underlying Index was concentrated in the information technology sector and had significant exposure to the software industry.
As stated in the last paragraph of the section of the Fund’s Prospectus titled “PRINCIPAL INVESTMENT STRATEGIES”, for an investment to be considered concentrated, it must hold more than 25% of its total assets in the respective sector and/or industry. Based on the current composition of the Underlying Index, the real estate sector does not currently meet this criteria. However, while not stated in the Prospectus, the second highest sector concentration falls in the real estate sector, and the associated real estate management & development industry. As the Underlying Index is designed to provide exposure to property technology, the Registrant believes that the concentration in the information technology sector and the software industry is appropriate and reflects companies that are utilizing technology for purposes as defined in the Prospectus.
11. Comment: Please confirm whether the Fund will invest in unsponsored depositary receipts as part of its principal investment strategy. If so, please update the section of the Fund’s Prospectus titled “SUMMARY OF PRINCIPAL RISKS” accordingly.
Response: The Registrant confirms that it is not expected for the Fund to invest in unsponsored depositary receipts as part of its principal investment strategy.
12. Comment: Please update the section of the Fund’s Prospectus titled “PRINCIPAL INVESTMENT STRATEGIES” to define the Underlying Index’s definition of an emerging market country.
U.S. Securities and Exchange Commission
Attention: Karen Rossotto, Esq.
March 10, 2023
Page 5
Response: The Registrant notes that the section of the Fund’s Prospectus titled “PRINCIPAL INVESTMENT STRATEGIES” provides a list of countries that are eligible for inclusion in the Underlying Index and believes that the current disclosure is appropriate.
SUMMARY OF PRINCIPAL RISKS
13. Comment: Please revise the section of the Fund’s Prospectus titled “PRINCIPAL INVESTMENT STRATEGIES”, to disclose the types of equity securities in which the Fund will invest. In addition, please update the risk factor titled “Asset Class Risk – Equity Securities Risk” in the section of the Fund’s Prospectus titled “SUMMARY OF PRINCIPAL RISKS” to include risks associated with each type of equity security.
Response: The Registrant has updated the section of the Fund’s Prospectus titled “PRINCIPAL INVESTMENT STRATEGIES” as follows:
The Fund invests at least 80% of its net assets, plus borrowings for investments purposes (if any), in the securities of the Global X PropTech Index (the "Underlying Index"), and in which may include common stocks, American Depositary Receipts ("ADRs") and Global Depositary Receipts ("GDRs"), based on the securities in the Underlying Index.
14. Comment: Regarding the disclosure in the section of the Fund's Prospectus titled "PURCHASE AND SALE OF FUND SHARES" on page 9, to the extent applicable, please disclose that purchases and redemptions of creation units primarily with cash, rather than through in‐kind delivery of portfolio securities, may cause the Fund to incur certain costs. Please also disclose that these costs could include brokerage costs or taxable gains or losses that it might not have incurred if it had made redemption in‐kind. In addition, please disclose that these costs could be imposed on the Fund, and thus decrease the Fund’s net asset value, to the extent that the costs are not offset by a transaction fee payable by an authorized participant.
Response: The Registrant notes that the section of the Fund’s Prospectus titled “SUMMARY OF PRINCIPAL RISKS” includes the risk factor titled “Cash Transaction Risk”, which the Registrant believes addresses the Staff's comment.
15. Comment: With respect to the risk factor titled “Focus Risk” in the section of the Fund’s Prospectus titled “SUMMARY OF PRINCIPAL RISKS”, please tailor the disclosure to reflect the Fund’s principal investment strategy.
Response: Please see the Registrant’s response to Comment #10 above.
16. Comment: With respect to the risk factor titled “Geographic Economic Exposure Risk – Asian Economic Risk” in the section of the Fund’s Prospectus titled “SUMMARY OF PRINCIPAL RISKS”, the Staff notes that the disclosure refers to historical tensions between North Korea and South Korea. Please consider whether there are other flash points that present similar risks.
Response: The Registrant has revised the section of the Fund’s Prospectus titled “SUMMARY OF PRINCIPAL RISKS – Geographic Economic Exposure Risk – Asian Economic Risk” as shown below: