Anthony Ginsberg Cofounder HAN-GINS ETF range
I. Why did you create the (ITEK ETF)?
We created ITEK to allow investors a single ETF that covers the major areas of Technology Innovation underpinning the 4th Industrial Revolution. These key disruptive forces are not adequately captured by traditional Technology Indices following the reclassification of technology in late 2018 (see slide below) – by the GICS (Global International Classification System). Many of the older technology sector benchmarks are no longer fully represent the most exciting technology leaders. ITEK uses Solactive’s rules based design which closely follows all the well-respected FactSet technology subthemes. This ensures we have as a broad a technology universe as possible – truly global.
ITEK offers the broadest possible diversification across 8 key technology themes – from cloud computing, cybersecurity, robotics/automation and social media to future transportation, genomics (healthcare innovation), virtual reality and blockchain.
II. What is unique about it?
ITEK is a unique design in deciding against overweighting any one particular theme over another. Not only is each subtheme above equally weighted, but within each subtheme all stocks are equally weighted. We not only hold the leading and most dominant stocks per subtheme – but cap this at a maximum of 15 stocks each. Otherwise we find the impact of any one stock is just too small.
By equally weighting each of these themes and rebalancing every six months – investors are not taking an active bet on any one theme over another. We are providing a one-stop solution for investors seeking broad exposure to the most disruptive and defining technology trends of our generation.
III. What is in it?
ITEK holds many of the world’s most recognisable technology leaders and disrupters including the likes of Tesla, Apple, Alphabet (Google), Amazon , Alibaba and Facebook. However they are equally weighted with many younger more nimble companies across social media, cloud computing and the other subthemes. A number of these smaller companies are growing at a faster pace than the Megacaps – so we like the mixture and balance that this brings to our ETF. Examples of exciting smaller players include Splunk and Salesforce (Cloud), Snap, Yandex, Baidu and Weibo (Social Media – the latter 3 are non US), Intuitive Surgical (Robotics), NVIDIA (future cars)
The eight themes represent the bulk of global technology spending. ITEK has a global focus, with just over one third of the portfolio being non US (Asia 22% and Europe 11%)
IV. Which investors should buy it?
For investors seeking broad exposure to not just Silicon Valley and the US but also global technology leaders – ITEK offers a relatively low-risk way into technology. Unlike the Nasdaq and other narrow indices dominated by a handful of megacaps and the FAANGS – ITEK by comparison offer equal weighting to all our almost 100 underlying constituents.
ITEL cuts across multiple technology themes – form healthcare innovation to electric vehicles, cloud computing and cybersecurity. So it is truly a very broadly diversified technology fund. By not only equally weighting each tech subtheme but also equally weighting the stocks within the subtheme – it ensure the investors are not over expose to any one sector. ITEK is most often used as a core or foundational investment into the technology sector. Investors can always buy into individual themes in separate ETFs which we also offer. However ITEK provides a ready mad one stop shop. It is typically used by more conservative investors seeking exposure to the broad technology sector.
With technology gains continuing to power the broader stockmarket – investors can no longer avoid this sector. ITEK offer amongst the broadest ways to access the technology space at a relatively low cost.
V. Why buy it now?
ITEK returned 31.7% in 2019 and given its broad exposure to technology consistently outperforms single subthemes which are far more volatile. The slide below shows how ITEK’s diversification has helped propel it to top quartile growth over the past 5 years (2014-2019).
With the Coronavirus currently hurting technology stocks across the board – we expect a rebound in ITEK once the outbreak recedes. We see this as a perfect buying opportunity as none of our ITEK holdings have been impacted over the medium to longer term.
Most of the companies in ITEK are truly global in scale, with many of them still at the early stages of their global growth. In particular the US companies still often derive most of their revenues from the US but are on course to generate a far greater proportion of their profits abroad over the next decade. Before these companies are rerated higher by analysts – we believe it is important to get on the ground-floor before many truly go global.
The overall PE ratio of the Solactive benchmark currently is approximately 30. This is now set to fall due to the Coronavirus – so prices will be even more attractive. While it is hard to time markets – the almost 12% retreat in ITEK in mid-February offers a rare buying opportunity.