Goldman Sachs believes people are over invested in big cap tech names such as Facebook, Amazon, Apple, Netflix and Google [FAANG] that have minted fat profits and higher stock prices the past decade amid an explosion in tech advances.
To get investors thinking beyond FAANG, the investment bank recently launched the Goldman Sachs Future Tech Leaders ETF. As the name implies, it looks to invest in the next big winners in tech that have true global exposure.
"We launched the ETF strategy because we noticed there was a growing disconnect between where investors are positioned and where we are seeing the most attractive returns over the next decade or so," said Sung Cho, the portfolio manager of the ETF, on Yahoo Finance Live. "For the last 20 years, it has been focused in the U.S. and in mega cap tech companies. We believe we are at a key inflection point where innovation is expanding beyond the U.S., as well as beyond the market cap spectrum."
The actively managed ETF currently has 66 holdings, which were selected by Goldman's fundamental equity team. Top five holdings include (in order of size): Marvell Technology, MercadoLibre, HubSpot, Workday and Kingdee International. Nearly 80% of the sector weight is concentrated in information technology and communication services.
Since debuting this month, the ETF has relatively outperformed the S&P 500 and Nasdaq Composite. Still, the ETF hasn't been immune to the market volatility seen this month — it's down about 1.9% since debuting.
Goldman's new ETF puts it in a direct battle with Cathie Wood's Ark Invest's flagship Ark Innovation ETF for forward-thinking tech-minded investors. That worthy competitor isn't lost on Goldman's Cho.
"We have a tremendous amount of respect for Cathie Wood as an investor and the business she has built. We fundamentally agree we need to get investors on the right side of disruption. But how we approach this problem is very different relative to our competitors, not just Ark. First of all, we are more global — 50% of our investments are non-U.S. We believe we are uniquely positioned to take advantage of all the analysts we have around the world. We are also focused on anything that has a market cap of less than $100 billion. We are very much focused on small businesses instead of more of an all-cap strategy that a lot of our competitors have," explained Cho.