A new equal-weight tech feeder fund launching on major Lisp platforms aims to give local advisers broader exposure to the digital economy beyond the Mag 7.
South African advisers allocating to global technology stocks may be taking on more concentration risk than they realise, according to Anthony Ginsberg, managing director of GinsGlobal Index Funds.
Speaking to Citywire South Africa during a visit to his former homeland, Ginsberg (pictured above) said many global portfolios remain heavily exposed to the same handful of US mega-cap companies that have driven market performance over the past few years.
‘Too many investors and advisers are chasing the same six or seven famous names,’ he said. ‘Those companies have done extremely well, but it does mean many portfolios are far more concentrated than people realise.’
Ginsberg is in the country promoting the BCI HAN-GINS ZAR Tech Megatrend Equal Weight Feeder fund, which recently became available to South African advisers through major Linked Investment Service Provider (Lisp) platforms, including Allan Gray, Glacier, Momentum, Ninety One and Sygnia.
The feeder fund provides access to the HAN-GINS Tech Megatrend ETF, a European-listed strategy tracking the Solactive Innovative Technologies index.
The fund holds roughly 140 companies across 10 technology themes, including artificial intelligence, robotics, cyber security, blockchain, digital entertainment, cloud computing, defence technology and quantum computing.
Unlike many tech products available locally, the portfolio spreads exposure more evenly rather than concentrating heavily in a handful of mega-cap companies.
Betting on a broader technology cycle
Ginsberg argues that the global technology sector is entering a phase where leadership may rotate beyond the companies that have dominated the artificial intelligence boom.
Instead of relying on a few large companies, the strategy allocates across multiple technology themes and rebalances every six months.
‘Every year a different technology theme becomes the leader,’ he said. ‘One year it may be AI, another year cyber security or robotics. It is extremely difficult to time these shifts.’
Recent performance illustrates that rotation. According to the firm’s latest Monthly Tech Megatrend Market report, defence technology and blockchain were among the strongest contributors earlier this year.
The diversification also affects valuations. While the largest US technology companies trade at elevated multiples, the broader portfolio is priced more modestly.
‘Our portfolio is trading at roughly 20 to 21 times earnings,’ Ginsberg said. ‘The Nasdaq is closer to 33 times because it is so heavily weighted to the Magnificent Seven.’
The strategy also includes meaningful exposure outside the US. American companies currently account for about 55% of the portfolio, while Asia represents more than 20%, including holdings in China, Japan and South Korea.
‘We do not believe America has a monopoly on innovation,’ he said. ‘Japan is a leader in robotics, Asia plays a major role in semiconductors and cloud platforms, and we want exposure to those areas as well.’
Positioning for advisers
Ginsberg said the strategy is primarily being marketed to independent financial advisers and wealth managers, who often already hold concentrated technology exposure through Nasdaq trackers or large US technology companies.
‘What we are seeing is that advisers already have some exposure to the big tech names,’ he said. ‘They are using this strategy to broaden that exposure rather than replace it.’
Typically, the allocation forms a relatively small part of a portfolio.
‘Most investors allocate around 5% to 7% to the strategy,’ Ginsberg said. ‘Often they reduce a portion of their Nasdaq exposure and add this alongside it.’
The feeder fund structure allows advisers to access the offshore ETF through local platforms and use it within common South African investment wrappers such as retirement annuities and living annuities.
Ginsberg believes the timing may also appeal to investors reassessing their global allocations.
South Africa’s equity market has performed strongly at times over the past year, but the country’s economic growth outlook remains modest.
‘If your domestic economy is growing at around 1% a year, it makes sense to look for exposure to faster-growing parts of the global economy,’ he said.
At the same time, he remains optimistic about the broader US economic outlook.
Ginsberg said fiscal stimulus, tax incentives and corporate investment in areas such as artificial intelligence infrastructure and semiconductor manufacturing could support US growth of around 3.5% over the next year.
‘There is a huge amount of capital expenditure going into data centres, semiconductors and AI infrastructure,’ he said.
Despite geopolitical tensions and market volatility, he believes technology remains a long-term structural growth theme.
‘Technology is not a short-term trade,’ he said. ‘These trends play out over many years. The bigger risk is often avoiding them altogether.’
This article originally appeared on Citywire