During the week we had the chance to talk to the American manager Anthony Ginsberg who runs GinsGlobal Index Funds. This company manages three exchange-traded funds, all of which have been very successful since their launch. Focusing on the hot technology sector, GinsGlobal Index Funds has managed to dot the right one more than once and in several cases found companies that have more than doubled in value. OVER the past 12 months, ITEK has risen by almost 90 percent, something that few funds, exchange-traded or unable to deliver. Anthony Ginsberg also works with equal-weighted holdings, which significantly lowers the risks, making it even more impressive that his fund has almost doubled in value.
Anthony Ginsberg, founder of GinsGlobal Index Funds, as manager of the three exchange-traded funds SKYY, WELL and ITEK all benefited from the rapid technology transition during COVID-19. ITEK was quick to find Tesla, but it’s not the only holding that contributed to the big increase in value in his fund ITEK that has nearly doubled in value in the past 12 months.
Can you tell us a little more about your ETFs, ITEK; WELL and SKYY. You manage them from the United States, but they’re all listed in Europe. Why did you choose Europe and not the United States?
We believe that ETFs provide a diversified, inexpensive way for investors to access various technology themes. Our Tech Megatrend (ITEK), Cloud Tech (SKYY) and Healthcare Innovation (WELL) ETFs offer European investors easy access to leading global players in these fast-growing technology areas – often dominated by US players.
By adopting an equally weighted approach for all these 3 ETFs, along with ESG screening for both SKYY and WELL – these are truly unique Tech ETFs in Europe.
In the US, there is an increasingly risky ETF trend – offering very narrow themes and we wanted to stay away from this. Over the past 20 years, GinsGlobal Index Funds has managed broad diversified index products for both individuals and institutional investors, including insurers, banks and other asset managers. Our basic approach is to facilitate cheap access to global markets, as opposed to very narrow products with only a few holdings.
For example, ITEK covering the entire digital revolution – eight sub-themes from robotics, social media, cybersecurity to future cars, digital entertainment and blockchain. By being equally weighted, it ensures that our megacap FAANGS exposure is less than 10 percent.
ITEK’s exposure in the US is also around 57 per cent, much smaller than the Nasdaq – which is almost 100 per cent US-weighted and highly concentrated in FAANGS (over 40 per cent). Both our SKYY and WELL-ETFs have a US exposure of approximately 75 percent because our mandates are global. In recent years, we’ve seen the rapid rise of leading Asian players across tech space(Alibaba, Tencent, Bilibili, Baidu, etc.).
We also feel strongly that ESG-compliant companies are best for our investors and the future of our planet. The US has been slower to carry out ESG screening than Europe. We want to offer responsible ETFproducts that take climate change into account, good corporate governance and social norms/responsibilities. Fortunately, technology companies mostly follow these questions – and don’t do much with fossil fuels or controversial weapons. Our ESG screening complies with the UN Global Compact principles.
I’ve looked at your ETFs, and actually the ITEK ETF reminds me a lot of Cathie Wood ARK ETFs. I also see many differences. Can you tell me a little more about that?
Our ETFs typically have between 75-100 holdings and are much more diversified than active managers like ARK. Our index design uses an equally weighted approach – so our holdings are rarely over 1 percent – 1.5 percent weights in a single holding. This significantly reduces our risk exposure. Active managers like ARK often have 10 percent – 15 percent exposure in a single holding. We rebalance our ETFs twice a year and follow strict index-based rules. Solactive and Indxx are two well-respected thematic index design companies – which independently helped create these broad global Tech Index benchmarks for us to follow. We believe they are well-constructed rules-based indices that offer much greater diversification than most active managers in the field of technology.
As I understand it, you’re from South Africa, Elon Musk is also from South Africa. Is that one of the reasons you took Tesla so fast?
Not really, but his success is compelling. I’ve lived in California for almost 30 years, no doubt the epicenter of new technology. Tesla cars are incredibly popular here on our roads and have helped accelerate EV adoption in the US. While we remain behind the Nordic countries in terms of overall adoption of electricity consumption – Tesla is a key content of our future sub-theme within our Tech Megatrend ETF (ITEK). Tesla is adding two major new factories this year – in Berlin and Texas. Tesla has achieved new record production speeds over the past two quarters, so we remain optimistic about the stock despite the significant 2020 gains. Their battery and software technology is way ahead of many traditional car manufacturers. It is also likely that they will succeed with self-driving/automated cars and threaten the likes of Uber one day in the taxi market.
What do you think of the other EV companies? You mention Tesla a lot, which, by the way, must have given the owners of your fund a good profit, but you I rarely see you mentioning their competitors.
China is probably the largest EV market in many years, so we are optimistic about NIO – Tesla’s main competitor there. In Europe, we are encouraged by Volkswagen at the latest – they will triple the number of car models they will produce in EV space in 2024. Of course, Volvo has already made a great commitment to this space and is very successful. In Japan, Toyota is the car manufacturer in which we are most optimistic in the EV field.
You use an equal weight method, which has its pros and cons, can you enlighten us a little more about it?
An equally weighted approach ensures that smaller and more innovative companies are increasingly represented in our ETFs. Moving away from the pure Market Cap index reduces the risk that we will only be overexposed for only the largest Tech companies (so-called FAANGS) and other Megacaps. Under President Biden, we believe U.S. rules are likely to limit the flexibility of the largest Tech players to make significant groundbreaking acquisitions in the future. This is due to antitrust (monopolies) and privacy considerations. An equally weighted approach has the advantage of limiting exposure to an individual company and including a more diversified mix of holdings. It reduces our risk/volatility exposure by holding close to 100 holdings – with a weighting of approximately 1 percent per holding.
Today you have three different ETFs, all with their own theme, although ITEK can buy shares in the same sectors as the others. Is there a chance that you will start sub-funds for ITEK if you identify an interesting niche?
Yes, we could launch additional ETFs within certain sub-themes of ITEK. Currently, we have chosen Cloud Technology and Healthcare Innovation as the two most promising sub-themes. Even before COVID, companies were increasingly using the cloud to lower their hardware costs. We’re seeing cloud spending double in the next two years – that it will exceed $500 billion annually. It is by far the fastest growing area of IT spending – rapidly gaining market share and from 2020, spending on site surpassed traditional IT departments for the first time.
COVID has fast-tracked virtual cloud usage and we see that this trend continues to increase. Health care also benefits from the cloud via telemedicine. But there are major innovations that occur in the field of biotechnology, genetic sequencing, medical devices, neuroscience, bioinformatics, etc. We have identified ten sub-themes in Healthcare that are compelling trends. Health care already represents 20 percent of U.S. GDP and until recently has benefited from the slowest areas of adoption of digital transformation. COVID has quickly tracked the adoption rate in this space with at least five years of rules and health insurance now encouraging digital/virtual treatments.
How often do ETFs own shares in the same company?
Because we use Solactive to create index indices for both ITEK and SKYY – there is some overlap between cloud companies. However, our SKYY product contains 75 holdings, while ITEK has only a maximum of 15 holdings per sub-theme (for example, Cloud). We also own some Gene Editing companies both in ITEK and in our Healthcare Innovation ETF.
How has the Corona pandemic affected your work and the chance to meet new interesting companies for the ETFs?
Since our ETFs only invest in publicly traded technology and healthcare companies – we haven’t really suffered because of COVID to identify innovative new players. Our ETFs follow a rules-based process for companies to qualify for inclusion. Possession must survive a tough screening process. This includes a minimum market size, a daily trading volume (liquidity) and Pure-Play criteria (i.e. revenue thresholds above 50 percent per theme/sub-theme). ESG screening is applied first.
The original article can be found at ETFmarknaden