Whether society is ready or not, robotics, artificial intelligence (AI), machine learning, or any other type of disruptive technology is the next wave of innovation, and Goldman Sachs Asset Management realizes the opportunity. Today, GSAM announced the launch of a suite of five exchange-traded funds (ETFs) that invest in the creators and adopters of innovation, across a range of sectors, market caps and geographies.
These ETFs seek to track indices created by Motif, a leading provider of systematic, data-driven indices and strategies.
“We’re bringing together human insight and data science by leveraging innovation to invest in innovation,” said Hardeep Walia, CEO and Founder of Motif. “Our proprietary approach identifies the companies that are creating or adopting innovative technology and quantifies their relevance. We’re excited to work with one of the world’s leading asset managers to deliver these unique investment products.”
The Theme of Transformational Change
The ETFs provide exposure to the themes that GSAM views as driving transformational changes to the global economy: Data-Driven World, Finance Reimagined, Human Evolution, Manufacturing Revolution and New Age Consumer. For investors who missed out on the serendipitous run of FAANG (Facebook, Amazon, Apple, Netflix, Google stocks, they can look to capitalize on these disruptive tech options in 2019 and beyond.
“One of the phrases we say a lot is tech is no longer an industry; every industry is tech,’” said Mike Crinieri, GSAM’s Global Head of ETF Strategy. “Said another way, technological innovation is disrupting the ‘traditional’ across all industries and creating new structural growth opportunities. Over the last 50 years, 96% of equity returns have been driven by fundamentals (earnings and dividends), so as an investor, you want to invest in structural growth. We believe those that embrace technological innovation—by being either the creators or the adopters of innovation—will become tomorrow’s leaders (and we think this applies both to companies and to investors).”
These funds leverage the asset management expertise of Goldman Sachs and the proprietary technology of Motif to provide exposure to technology-driven structural growth opportunities across various developed and emerging equity markets.
“We say the funds ‘leverage innovation to invest in innovation,’” said Crinieri. “We have partnered with Motif, an industry leader (and in fact themselves a disruptor) in applying data-science and automation to construct bespoke indices. We think we’ve combined the investment expertise of Wall Street with the technological capabilities of Silicon Valley to create something very special.”
5 ETFs for Areas Rife for Innovation
The following Goldman Sachs Motif ETFs are available to investors on NYSE Arca today at 50 basis points:
- GDAT: Goldman Sachs Motif Data-Driven World ETF: akin to the IT sector, but focuses on artificial intelligence, big data, cyber security, data infrastructure, and the internet of things.
- GFIN: Goldman Sachs Motif Finance Reimagined ETF: a more forward-looking financials sector, and provides exposure to the digitization of finance, blockchain and the changing asset management industry.
- GDNA: Goldman Sachs Motif Human Evolution ETF: the healthcare sector of tomorrow. It includes precision medicine, robotic surgery, genomics, life extension and digital health, as examples.
- GMAN: Goldman Sachs Motif Manufacturing Revolution ETF: a more forward-looking version of industrials. It’s about innovative technologies such as robotics, 3D printing, drones, driverless cars and clean energy.
- GBUY: Goldman Sachs Motif New Age Consumer ETF: includes e-commerce, social media, online gaming, music and video streaming, digital education, and health and wellness.
To construct each index, Motif employs a rules-based methodology to analyze both traditional and alternative data in order to calculate a company’s ‘thematic beta’1 and quantify its exposure to a specific transformational change. Proprietary technology is used to select and weight securities in the index, based on their relevance and investability.
“We believe the Motif approach is unique and highly differentiated as it ensures that the indices offer very precise exposure to each theme—Motif analyzes both traditional and alternative data using their expertise in natural language processing to identify creators and adopters of innovation,” said Crinieri. “They don’t stop there. Motif then quantifies every company’s exposure to a given theme by calculating its ‘thematic beta.’ The end result is a precise index with a systematic, rules-based methodology.”
Disruptive technology is not relegated to certain sectors as it will permeate into all industries in some form or fashion. For example, augmented reality is technology comprised of digital images superimposed over the real world, and its use is primed to drive industry growth–industries like real estate and manufacturing are already putting the technology to use in a variety of ways.
“Technology is impacting every aspect of our daily lives,” said Crinieri. “It has grown from a single sector to a key driver of every sector. We are delighted to offer investors the ability to invest in companies driving these transformational changes.”