Investors looking for future leaders in traditional market sectors can turn to active exchange-traded fund strategies to seize these emerging opportunities.
During the recent webcast, Positioning for the Future with Thematic ETFs: A Discussion with Goldman Sachs Asset ManagementMarissa Ansell, Lead Client Portfolio Manager for Thematic Investing, Goldman Sachs Asset Management, presented five ETF strategies for accessing long-term secular growth themes that Goldman Sachs Asset Management believes will drive capital markets over the coming decades to come, including the Goldman Sachs Future Tech Leaders Equity ETF (GTEK) invest in future technology leaders with lower market capitalization and outside the United States; the Goldman Sachs Future Planet Equity ETF (GSFP) invest in companies providing solutions to environmental problems; the Goldman Sachs Future Health Care Equity ETF (GDOC) investing in innovators that are transforming healthcare; the Goldman Sachs Future Consumer Equity ETF (GBUY) invest in companies aligned with changing consumption patterns; and Goldman Sachs Future Real Estate and Infrastructure Equity ETF (GREI) to invest in real assets benefiting from these secular growth trends.
Brook Dane, Portfolio Manager, Goldman Sachs Asset Management, outlined investment opportunities in tomorrow’s technology leaders, such as smart components, cybersecurity, advanced semi-capitalized equipment, consumer Internet, digital transformation, fintech, etc. He also noted that most investors are overexposed to ultra-large-cap U.S. tech companies, with the S&P 500 including a 38% tilt toward tech-related companies and the benchmark’s tech components accounting for just 19%. % of total global technology universe.
“We believe there is a disconnect between where most investors are in technology and where we see the most attractive potential opportunities,” Dane said.
Ansell highlighted the ongoing climate transition which creates investment opportunities. For example, solutions across many different businesses are needed to address the climate change emergency, creating potential investment opportunities in companies developing innovative solutions, such as electric vehicles, plastic substitutions single-use, renewable energy, smart cities, water treatment, energy storage and vegetable proteins, among others.
“Extreme weather and geopolitical events have highlighted the scale of the climate emergency, and we believe
companies that provide environmental solutions will benefit,” Ansell said.
Dane noted that investing in businesses aligned with changing consumer trends also capitalizes on shifting purchasing power among different demographics. Specifically, Millennials and Generation z are now the largest population in history, representing approximately 4.9 billion people worldwide. The incomes of millennials have also exceeded those of other generations. These younger consumers are also more digital savvy.
“Young consumers have grown up as digital natives and have different lifestyles and values,” Dane said.
Ansell highlighted technological innovation that has revolutionized the healthcare industry. As the healthcare industry continues to evolve and adapt to the rapidly changing landscape, there are a number of potential investment opportunities in several areas, such as genomics, precision medicine, digital health care and technological procedures.
“An unsustainable model inspires new solutions that improve patient outcomes while reducing costs. A win for all,” Ansell said.
Finally, Ansell believed that the future real estate and infrastructure sectors could offer investors a complementary way to also gain exposure to secular growth trends. Both of these segments benefit from some of the growth themes mentioned above through cell towers, digital storage, energy transition utilities, renewable energy producers, water utilities, logistics, transportation, leisure hospitality, life sciences and housing, among others.
In addition, Ansell highlighted the attractive yields that many real estate and infrastructure companies offer, as well as their low volatility compared to other equity segments.
Dane noted that these strategies are all actively managed and supported by the Goldman Sachs Asset Management team, with well-established thematic managers who have years of experience and cover six geographies around the world to provide real-time insights into local industries.
The strategies follow a strict bottom-up investment process.
“We focus on growth which we believe is undervalued because what you pay matters as much as what you buy,” Dane said. “As a member of GS, we have direct access to CEOs and CFOs of companies. We have less than five percent of our portfolios in unprofitable companies.”
Additionally, the portfolios adhere to a disciplined construction methodology.
“We supplement high-growth stocks with more value-oriented ideas to help manage risk thoughtfully,” Dane said. “We invest in innovative companies around the world, in both developed and emerging markets. With a bias towards small caps, where we often find attractive investment opportunities.”
Despite recent declines in innovative growth segments, Dane argued for the long-term appeal of innovative stocks, which offer higher margins and faster earnings growth, which can help justify their premium in the market. larger actions.
Moreover, innovative companies can even outperform in the current inflationary environment since innovation helps offset the impact of rising costs, according to Dane. For example, demand is usually inelastic, and having best-in-class products helps justify higher prices. Firms are also investing in innovation to offset the impact of rising input costs.
Meanwhile, recent world events have further accelerated many of these themes, driving significant investments in semi-relocation, energy independence and healthcare innovation.
In this type of environment, “we think active management is more important than ever,” Dane said. “Being stock selective and maintaining a balanced portfolio is key as the market becomes more demanding.”
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.