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Tech Megatrend Monthly Report | July

 

  • COVID-19 has fast tracked the adoption rate of innovative technologies (robotics, genomics, cloud, and cybersecurity).
  • Work from home behaviours has boosted demand and traffic across social media and cybersecurity. 
  • Gene therapies are becoming more mainstream in the search for vaccines and personalised medicine.

 

Our Tech ETF: HAN-GINS Tech Megatrend Equal Weight UCITS ETF (ITEK) has continued to perform well.  In June it posted a gain of 6.7% and stands with a year to date return of 11.8%. 

Over the past 12 months, ITEK has gained 23.5%. Performance across the equally weighted 6 subthemes currently populated has been remarkably strong, each exceeding 20% gains for the 2nd quarter (See table on page 5).  This helped propel the Tech ETF to a 30.5% gain during the 2nd quarter.

Its NAV has reached an all-time high of $10.79/share*

The genomics theme helped drive gains during the 2nd quarter, recording the best performance of all the subthemes (up 37.4%). This translates into a performance contribution to ITEK of 6.8% for the quarter. See table on page 5 for full breakdown

In particular, stand out performers for the 2nd quarter include:

  • Allogene Therapeutics (120.3%)
  • Tesla (106.1%)
  • Betta Pharmaceuticals (100.3%)

(Source: FactSet/Solactive and Bloomberg Data as of 30/06/20)

The top performers for the quarter mostly represented Genomics, Future Cars and Cybersecurity.

ITEK Monthly Performance

June

YTD*

12 Month**

6.7%

11.8%

23.5%

Past performance is no guarantee of future performance.

Source: Bloomberg/HANetf *YTD figures based on 01.01.20 - 30.06.20 **12 Month figures based on 01.06.19 -30.06.20

 

HAN-GINS Tech Megatrend Equal Weight ETF (ITEK) – 1 Year performance (28.06.19 – 30.06.20)

 

Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product. Investors should read the prospectus of the Issuer (“Prospectus”) before investing and should refer to the section of the Prospectus entitled ‘Risk Factors’ for further details of risks associated with an investment in this product. Source: Bloomberg / HANetf. Data as of 30/06/20

 

Innovative Technology News

Our Tech ETF is at the forefront of the 4th Industrial Revolution.  Its 6 subthemes being equally weighted have ensured the Fund has enjoyed the benefits of the ‘Work from Home’ phenomenon.  The COVID-19 lockdowns and the search for a vaccine have helped boost adoption rates across a variety of innovative technologies. In particular our Genomics, Cloud and Cybersecurity subthemes have benefitted – but so too has Future Cars, Social Media and Robotics-Automation.

The so-called Internet of Things is increasingly becoming a fixture of modern life. The shift to the Cloud has helped mainstream many technologies that otherwise would have taken years to adopt.  This includes the boost in demand for cybersecurity companies - benefiting from the growth in VPN usage and other forms of security software licenses.  In 2020 the size of the cyber security market is estimated to be just under $200bn by Cybersecurity Ventures.  There is broad consensus that the industry will continue to benefit from huge tailwinds, reaching anywhere between $250 Billion and $1 Trillion per year by 2025. [1]  

With millions of people around the world working from home, key tech trends are being adopted even sooner than analysts expected.  Corporate IT departments are aggressively reducing their spending on in-house hardware and maintenance in favour of the Cloud.  From telemedicine and medical wearables to cloud computing and AI/Robotics, the world is changing fast. Businesses, hospitals, consumers and commuters are unlikely to go back to pre-COVID19 habits.

Remote working means the need to access information, tools and systems. The need to communicate remotely has never been higher, creating a huge demand for cloud-based technology.  Big Tech has benefited from growth of their remote Cloud platforms – particularly leaders in Infrastructure as a Service (IaaS) like Amazon, Microsoft and Google. This growth in remote access has also highlighted the need for enhanced cybersecurity and we have recently witnessed spiking demand for data and privacy protection – boosting Cybersecurity stocks. Over 80% of IT managers expect cyber security to be their largest spend in 2020 as companies rush to plug vulnerabilities in their systems. [2]

This demand comes from both the public sector (schools, governments, hospitals) and large/small players in the private sector. The likes of Adobe, Salesforce, SAP and Oracle are big beneficiaries of this rollout of Cloud’s plumbing.  Cloud spending is benefiting at the expense of other IT areas.  The flexibility and lower-cost subscription model offered by the Cloud – makes it increasingly an easy solution for many corporate IT departments.

Cybersecurity market growth - reflects the following phenomena:

  • Average corporate data hacks costing companies ~$4m.
  • Top priority for CEOs - big increases in corporate spending to mitigate risk of cybercrime.
  • Current size of the cybersecurity market ~ $173 Billion.
  • Industry benefiting from huge tailwinds, expected to easily double or even triple by 2025.
  • Scale of issue is already huge: data breaches ~ 4.1 Billion records (first half of 2019).
  • Cyber-crime predicted to cost the global economy $6 Trillion a year by 2021.
  • Increased connectivity/Internet-of-Things is leading to 60% of US companies planning to increase Cybersecurity spend in 2020.

(Source:  HAN-GINS ITEK Cyber Security White Paper)

In China and Europe, lockdowns are also spurring local players (Alibaba, Baidu and Tencent) to enjoy record online traffic.  Baidu and Weibo have both seen a substantial increase in traffic due to the lockdown in China.  Other players including Facebook and the Meet Group [3] have enjoyed record usage – powering stock market gains. Meet Group’s video usage is up 40% and Facebook has reported a 50% increase in messaging and up to 200% increase in video calling since the start of the Coronavirus crisis. [4]

With traditional models of commuting and public transportation under question, the future car segment powered by Tesla has enjoyed a significant rerating in April. Analysts predict electric vehicle producers are better positioned to weather the current economic decline. Tesla shares have recovered significantly since its March lows – and are approaching recent highs, despite Elon Musk’s protestations.

Production output is increasing dramatically as robots become cheaper to produce. The cost of industrial robotics is expected to drop to average levels of just $20K per robot - converging with the cost of an average manufacturing worker. As the economic case for robotic workers becomes more attractive, Bain &Company expect the industry to grow 10% p.a. hitting $83bn in 2020 [5].   As onshoring back to the US and away from China become more mainstream – US manufacturers are likely to become the biggest adoptees of robots.  US labour costs show no signs of retreating – with minimum wage legislation spreading across the country. Robots are an increasingly attractive proposition to reduce overheads as onshoring occurs.

 

 

For illustrative purposes only Source: Synergy Research Group. Data as of Q4 2019. Data includes PaaS infrastructure as a service as well as hosted private cloud services

Social Media

While most traditional advertising mediums remain in long-term secular decline, digital advertising spend has rapidly accelerated. In aggregate, online ad spending grew from ~$48.4bn in 2008 to ~$227bn in 2018 and is estimated to reach ~$274bn this year (2020). Social media is increasingly dominant in the digital advertising market. [6]

 

Constituent News

Given the equal weighting of subthemes and their underlying holdings - the significant Genomics outperformance during the 2nd quarter has pushed its weighting to the top of ITEK.  Upon rebalance later this year all subthemes will be equal once more.

On the next page is a table showing which holdings contributed most to performance during the quarter (Top 20).  A large proportion of Genomics, Future Cars and Cybersecurity companies are represented.

COVID-19 has boosted Cybersecurity players Zscaler and CrowdStrike – both posting significant earnings gains recently.  Gains were experienced across the portfolio –with each subtheme gaining in excess of 23%. 

For the 2nd quarter Allogene Therapeutics posted impressive gains of 120.3%, Tesla was up 106.1% and Betta Pharma rose 100.3%.  Zscaler a leading cybersecurity player gained 79.9% with CrowdStrike in a similar field posting 80.1% gains.  CrowdStrike is one of the largest cybersecurity pure-plays focused on cloud computing. It provides security, threat intelligence, and cyberattack services. The company has been involved in multiple investigations of several high profile cyberattacks, including the Sony Pictures hack, plus the 2016 Democratic National Committee cyberattacks and email leak.

Zscaler is a global cloud-based internet security company, providing web security, firewalls, sandboxing, antivirus and related controls of user activity. The company also focuses on automated threat forensics and dynamic malware protection against advanced cyber threats, such as advanced persistent threats and phishing.

Zscaler is a direct beneficiary of more organizations moving to the cloud, a transition that disrupts the traditional perimeter defense model. The company believes that securing the on-premises corporate network is increasingly becoming irrelevant in a cloud- and mobile-first world.

ITEK’s Year to date returns of 11.9% have bene powered by Tesla up 158.1%, plus the above firms. In addition the likes of Nvidia (up 64.8%), Amazon (49.3%), Samsung (48.0%), Splunk (32.6%), Microsoft (29.8%) and Apple (24.9%) – have all boosted ITEK’s performance for 2020.

ITEK includes all the FAANGS excluding Netflix.  While they are equally weighted in the portfolio – their recent all-time highs have ensured ITEK enjoyed strong tailwinds throughout the 2nd quarter.  With current holdings now at 86 holdings – ITEK offers a broadly diversified play across the entire 4th Industrial Revolution sphere.

Past performance is no guarantee of future performance Source of all data: Solactive / FactSet. Data as of 30/06/20

 

ITEK’s Top 20 Performance Contributors - 2nd Quarter 2020

Holdings

Index Category

Average Weight (%)

Total Return (%)

Contribution to Return (%)

ALLOGENE THERAPEUTICS INC

Genomics

1.4

120.3

1.1

TESLA INC

Future Cars

1.3

106.1

1.0

BETTA PHARMACEUTICALS CO

Genomics

1.3

100.3

1.1

MEDIATEK INC

Robotics & Automation

1.2

81.0

0.8

CROWDSTRIKE HOLDINGS

Cyber Security

1.4

80.1

0.9

ZSCALER INC

Cyber Security

1.7

79.9

1.1

IPSEN

Genomics

1.2

66.4

0.7

GENMAB A/S

Genomics

1.3

65.2

0.7

OKTA INC

Cyber Security

1.4

63.8

0.8

ZAI LAB LTD-ADR

Genomics

1.3

59.5

0.7

INFINEON TECHNOLOGIES AG

Future Cars

1.0

59.1

0.5

APTIV PLC

Future Cars

0.9

58.3

0.5

SPLUNK INC

Cloud Computing

1.1

57.4

0.6

MICROCHIP TECHNOLOGY INC

Robotics & Automation

1.0

56.0

0.5

SAMSUNG SDI CO LTD

Future Cars

1.1

53.2

0.6

AGIOS PHARMACEUTICALS INC

Genomics

1.0

50.7

0.5

SOHU.COM LTD-ADR

Social Media

1.1

47.8

0.5

SEATTLE GENETICS INC

Genomics

1.4

47.3

0.6

YANDEX NV-A

Social Media

1.3

46.9

0.6

NVIDIA CORP

Future Cars

1.3

44.2

0.5

APPLE INC

Cloud Computing

1.2

43.8

0.5

PINTEREST INC- CLASS A

Social Media

1.3

43.6

0.5

 

Sub-Theme Performance:  2nd Quarter

Contribution

Total Return (%)

% Average Weight

% Performance of category

Genomics

6.8

18.1

37.4

Future Cars

5.9

15.9

36.7

Cyber Security

5.4

16.8

32.0

Robotics & Automation

4.9

16.3

29.7

Social Media

4.0

15.7

25.6

Cloud Computing

4.0

16.7

23.8


Past performance is no guarantee of future performance Source of all data: Solactive / FactSet. Data as of 30/06/20

 

The largest number of Top 10 holdings are currently represented by Genomics holdings, due to the strong gains in this subtheme. This has been powered by Biotech and Gene Therapy players - benefiting from the COVID-19 search for a vaccine.

US exposure remains dominant - largely powered by Cloud, Cybersecurity, Social Media and Genomics holdings. Asian weightings represent primarily Social Media, Robotics-Automation and Cloud Computing firms.

Top 10 Constituents

Weight

Zscaler Inc

2.04%

BioNTech SE

1.84%

Betta Pharmaceuticals Co Ltd

1.66%

Crowdstrike Holdings Inc

1.63%

MediaTek Inc

1.60%

Tesla Inc

1.57%

Allogene Therapeutics Inc

1.54%

Okta Inc

1.52%

Yandex NV

1.49%

Meet Group Inc/The

1.48%


Region Breakdown

Weight

North America

59.35%

Asia

24.98%

Europe

14.67%

MENA

1.00%

 

Sub-Theme Breakdown

Weight

Cloud

16.49%

Cybersecurity

17.47%

Future Cars

15.90%

Genomics

18.95%

Robotics & Automation

16.33%

Social Media

14.86%

 

 

 

Fund Details

HAN-GINS Innovative Technology UCITS ETF (ITEK) is a UCITS compliant Exchange Traded Fund domiciled in Ireland. ITEK tracks the Solactive Innovative Technologies Index (Net Total Return), an index of leading companies that are driving innovation in sectors including Robotics & Automation, Cloud Computing & Big Data, Cyber Security, Future Cars, Genomics, Social Media, Blockchain and Augmented & Virtual Reality.

The Solactive Index is managed according to a published, rules-based methodology. It is designed to measure the performance of an investable universe of publicly-traded companies that are involved in innovative and disruptive technological trends across a broad range of industries mentioned. To be included, companies must derive a majority of revenue from one of these themes.

Please remember that the value of your investment may go down as well as up and past performance is no indication of future performance.

 

EXCHANGE

BB CODE

RIC

ISIN

CURRENCY

INCOME

London Stock Exchange

ITEK LN

ITEK.L

IE00BDDRF700

USD

Acc

London Stock Exchange

ITEP LN

ITEP.L

IE00BDDRF700

GBP

Acc

Borsa Italiana

ITEK IM

ITEK.MI

IE00BDDRF700

EUR

Acc

XETRA

T3KE GY

T3KE.DE

DE000A2N5XE0

EUR

Acc

SIX

ITEK SW

ITEK.S

IE00BDDRF700

CHF

Acc

 

Click here to download: Monthly Innovative Technology Market Report 

 

 

 

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