US Global Investors Travel UCITS ETF has fallen sharply in recent weeks, as the war in Iran has triggered a broad and severe sell-off across global travel equities, particularly airlines, which sit at the core of the portfolio. The fund is down 11.09% over one month, leaving it 10.35% lower year-to-date. The speed of the decline reflects both the macro shock and the ETF’s concentrated exposure to a relatively small group of highly correlated travel stocks.
The catalyst has been the surge in oil prices following the outbreak of hostilities, with jet fuel costs rising sharply, putting immediate pressure on airline profitability. Jet fuel prices have jumped significantly in a short period as supply concerns have intensified, driving a sharp repricing across the sector. This has been compounded by disruption to flight routes and broader uncertainty around global travel demand.
The impact on the ETF’s largest holdings has been pronounced. American Airlines – one of the fund’s core positions – has fallen by over 20% over the past month, with United Airlines down by a similar amount from its recent high and Delta Air Lines also weak, underlining the scale of the sell-off across US carriers.
The weakness has not been limited to airlines. Cruise operators, another meaningful allocation within the fund, have also seen sharp declines, while hotel and booking platforms have drifted lower as investors reassess demand expectations in light of higher travel costs and geopolitical uncertainty. However, it is the airlines – which account for a significant share of the ETF’s top holdings – that have driven the bulk of the drawdown. Indeed, the fund’s top 4 holdings are all in the sector (the three American stocks mentioned, plus Ryanair).
The result is that a macro shock centred on energy and geopolitics has quickly fed through into double-digit losses for US Global Investors Travel, highlighting the sensitivity of thematic strategies to concentrated sector exposure.
Our view
David Batchelor, senior analyst at QuotedData, said: “War in Iran has had an impact on many parts of the global economy in recent weeks, and the US Global Investors Travel ETF is just one casualty. Its one-month loss has erased all the year-to-date gain, as many of its holdings have been in the crosshairs. The airline holdings such as American, United and Delta have been hit hard, as to a lesser extent have the hotel stocks. Although we are generally fans of the thematic ETFs, which offer something different to the index-plus big boys, the moves here do show the risk of being exposed to one particular theme that can be severely dented by an unexpected event such as a war.”.
