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Tech Megatrend Monthly Report | September

  • COVID-19 fast track adoption of technology continues to boost stock valuations across our 8 subthemes. 
  • Future Cars rerating of Tesla, Hyandai and others led this subtheme to outperform.
  • Cloud computing, Social Media, Cybersecurity and Robotics-AI also performed well. 
  • With US firms now below 60% exposure, the technology ETF benefited from Asian, Russian and other non US holdings. 
  • Equal weighting helped ensure diversified performance.

 

Performance Review

HAN-GINS Tech Megatrend Equal Weight UCITS ETF (ITEK) has continued to benefit from the tailwinds provided by faster technology adoption rates during the COVID-19 pandemic.  In August it returned 5.82%, and shows an impressive year to date return of 30.15%. 

Over the past 12 months, our technology ETF has gained 47.165. For 2020, performance across the equally weighted 7 subthemes currently populated has been dominated by Cybersecurity (up 42.0%), Genomics (30.7%), Social Media (38.0%), Future Cars (34.0%), Cloud Computing (25.6%) and Robotics-AI (17.3%).  For August, the standout performer was Future Cars, up 17.9%, led by Tesla which gained 74.2%.  Cloud Computing followed with a 7.9% gain and Social Media was up 5.3% for the month. These gains were powered by a broad rerating across Cloud, Robotics and Social Media stocks.

The leading performers in August benefited from Work From Home behaviours that have become increasingly permanent.  After Tesla, gains were led by Salesforce (39.9%), Hyandai cars (40.6%) and NVIDIA (26.0%) See detailed Table in report.

With online spending surging, Amazon has announced a new hiring spree of an additional 33,000 workers.  Microsoft, Amazon and Apple all hit new highs at the end of August, with Apple the largest US company reaching a $2 trillion valuation.    This has been powered by App Store.  Following Asian social media stocks posting record share price gains in July, it was the turn of Russian leaders Yandex and Mail.ru to post impressive gains in August.

ITEK enjoyed new highs through much of August and on 1st September 1st its NAV reached $11.92 per share[1].

For the year to date, Tesla remains the top performing holding – up 495.6%, followed by cybersecurity firms ZScaler (208.3%) and Crowdstrike (174.9*) and robotics firm NVIUDIA (127.6%)[2].

We believe remote behaviours are here to stay amongst increasingly tech savvy consumers and workers.  While profit taking is likely in the short term, over the medium term we believe ITEK contains the majority of leaders across the Fourth Industrial Revolution.  Unlike the top-heavy Nasdaq and MSCI Tech indices, our equally weighted ITEK approach ensures performance is less volatile and broader based.

ITEK Monthly Performance

August  YTD*  12 Month** 
5.28% 30.15%  47.16% 

Past performance is no guarantee of future performance.
Source: Bloomberg/HANetf *YTD figures based on 01.01.20 - 31.08.20 **12 Month figures based on 01.09.19 -31.08.20

 

Solactive Innovation Technologies Index (NTR) and ITEK ETF Performance

Total Return NAV to Date (up to 31/08/2020)

  1 M   3 M   6 M   YTD  12 M   Since Inception 
HAN-GINS Tech Megatrends Equal Weight UCITS ETF  5.82%  24.17%  35.77%  30.15%  47.16%  50.90% 
Solative Innovative Technologies Index (NTR) 5.08%  24.44%  36.07%  30.42%  48.08%  52.41% 

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 31/08/20

 

Innovative Technology News

The US-China trade war has spilled over to Social Media sites WeChat and TikTok.  The chart below shows their dominance in China and growing usage.  The global lockdown has boosted usage and propelled most social media stocks higher.

With the Internet of Things powering many of the current Tech megatrends, Cloud computing is the backbone, ensuring companies and consumers remain connected.  Gartner now predicts the worldwide public cloud service market will grow from $182.4bn in 2018 to $331.2bn in 2022, attaining a compound annual growth rate (CAGR) of 12.6%.[3] This growth may be understated, given how long COVID-19 outbreaks continue making new behaviours increasingly permanent.

The global Video Streaming Market is projected to grow to $184.3bn by the end 2027[4].  This translates into an impressive annualised growth (CAGR) of 20.4% between 2020 to 2027. Asia Pacific is expected to see the fastest growth due to increasing tech advancements (AI and Blockchain).  Global growing smartphone and Cloud adoption rates will help online video streaming from even remote locations and across the developing world.

 

ITEK Rebalance News

On September 9th 2020, ITEK was rebalanced as part of the regular twice-yearly process, with the number of holdings rising from 86 to 104. This includes 36 new additions and 18 deletions.  All 8 subthemes are represented with holdings and are equally weighted.  This ensures each holding has an approximate 1% weighting.

The increase in holdings provides further diversification.  These changes are primarily attributable as follows:

Digital Entertainment has been added as a new subtheme.  The subtheme includes our existing Virtual Reality subtheme, but is now far broader.  Given the growth of online streaming devices for movies, music and gaming, we felt it was important to capture these growing trends.  Amongst the 15 new holdings, these include Netflix, Spotify (music), plus Nintendo and Activision (leading gaming companies).  This subtheme includes the following expanded categories:

  • Virtual Reality Design and Engineering Software
  • Home and Office Virtual Reality Software
  • Virtual Reality Equipment 
  • Media Download and Streaming Digital Content Sites
  • Media and Entertainment Industry Software
  • Electronic Gaming Equipment
  • Electronic Gaming/Entertainment Electronics Makers
  • General Gaming Industries
  • General Gaming Products and Services
  • Online Gaming Systems
  • Other Games Software
  • Online Game Websites and Software
  • Handheld and Smart Phone Games Software

The Genomics (Gene Therapy) subtheme definition has also been expanded to fully capture all the new activity occurring across the gene therapeutic and editing arenas.  Consequently, eight new firms have been included, including Illumina and Agilent; both are global leaders (US based) in their respective genetic fields of genetic variation analysis and gene quality control/data analysis.  The definition now includes the following broader categories:

  • Hematological Oncology Biopharmaceuticals
  • Other Oncology Biopharmaceuticals
  • Biotechnology and Genomics (GMO/Hybrids) Products
  • Diversified Bioanalytical Instruments
  • Analytical and Bioanalytical Services
  • Bioanalytical Consumables
  • Genetic Molecular Diagnostic Test Kits

Cloud Technology - this mirrors the Top 15 holdings held in our HAN-GINS Cloud Tech ETF.  ITEK Cloud holdings were updated in line with our Cloud ETF holdings which were rebalanced in July.  Recent additions included Twilio and Zoom Video. This subtheme now more accurately captures the full scope of Cloud activity, including cloud security companies, plus cloud communications and conferencing firms.

Each of our 8 subthemes holds a maximum of 15 holdings, with each of these holdings equally weighted.  In turn each subtheme is equally weighted in the technology ETF.  The 8 subthemes represented are:

  • Social Media
  • Cloud Technology
  • Genomics
  • Robotics and Automation
  • Digital Entertainment
  • Cybersecurity
  • Future Cars
  • Blockchain

 

Constituent News

Prior to the upcoming September rebalance, the largest subtheme weightings were represented by Genomics, Cybersecurity, Robotics-Automation and Social Media – led by strong gains across these subthemes in August.[5]  

US exposure has dropped below 60% particularly due to foreign Social Media companies, Future Car and Biotech players – including Hyandai, Biontech and Mail.ru.[6]    

On the next page, the table shows which holdings contributed most to August performance.  It is clear that Future Cars drove performance off the back of tesla, followed by Cloud Computing, Social Media, Cybersecurity and Robotics.

It is gratifying to see our broad-based approach of having 8 subthemes is succeeding, with many of the subthemes being represented amongst the top performing holdings in August.  Due to significant Cybersecurity gains and analyst reratings, both Zscaler and CrowdStrike are now amongst our Top 10 holdings.  Asian and European/Russian social media players are now also appearing amongst our top holdings (Sohu, Sogou, Mail.ru and Yandex).  Not surprisingly, Tesla, at 3.1%, was our largest weighting due to its recent impressive gains in August.

With current holdings rising to 104 in early September (at rebalance), ITEK is well positioned to weather any immediate profit taking.  A number of Tech stocks have performed beyond expectations and we expect some pullback.

ITEK offers an increasingly broad diversified play across the entire 4th Industrial Revolution sphere – with broad global diversification.

 

ITEK's Top 20 Performing Contributions (%) - August 2020

Name of Holding

Index Category

% Average Weight

Total Return (%)

Contribution to Return (%)

TESLA INC

Future Cars

2.25

74.15

1.41

SALESFORCE.COM INC

Cloud Computing

1.06

39.93

0.40

HYUNDAI MOTOR CO

Future Cars

1.19

39.95

0.38

NVIDIA CORP

Robotics & Automation

1.49

26.00

0.35

APPLE INC

Cloud Computing

1.45

21.66

0.30

YANDEX NV CLASS A

Social Media

1.62

18.58

0.29

MAIL.RU GROUP-GDR REGS

Social Media

1.56

16.64

0.25

ADVANCED MICRO DEVICES

Robotics & Automation

1.54

17.29

0.25

ZSCALER INC

Cyber Security

2.15

10.39

0.22

FACEBOOK INC

Social Media

1.49

15.58

0.22

CROWDSTRIKE HOLDINGS INC

Cyber Security

1.55

11.07

0.18

SAMSUNG SDI CO LTD

Future Cars

1.33

14.18

0.17

ADOBE INC

Cloud Computing

1.15

15.55

0.17

YUAN LONGPING HIGH-TECH AG-A

Genomics

1.16

16.38

0.16

QUALCOMM INC

Robotics & Automation

1.23

12.77

0.15

ALIBABA GROUP HOLDING-SP ADR

Cloud Computing

1.08

14.35

0.15

AMAZON.COM INC

Cloud Computing

1.51

9.05

0.14

GENMAB A/S

Genomics

1.40

10.39

0.14

TWITTER INC

Social Media

1.24

11.48

0.14

Pinterest Inc

Social Media

1.93

7.29

0.13

 

Sub-Theme Performance (%) - August 2020

Contribution  Total Return (%) % Performance of Category 
Social Media  0.97  5.28 
Robotics & Automation  0.67  3.70 
Genomics  -0.3  -1.81 
Cyber Security  0.62  3.84 
Cloud Computing  1.24  7.87 
Future Cars  2.61  17.93 

Past performance is no guarantee of future performance Source of all data: Solactive / FactSet. Data as of 31/08/20

 

Total 10 Constituents

Tesla  3.11% 
Zscaler Inc  2.30% 
Sohu.com  2.20% 
Sogou Inc  2.12% 
Pinterest Inc  1.96% 
Crowdstrike Holdings Inc 1.78% 
Yandex NV 1.75% 
Mali.Ru Group  1.75% 
Advanced Micro Devices  1.67% 
NVIDIA Corp   1.65% 

 

Sub-Theme Breakdown

Cloud  15.48% 
Cybersecurity  17.80% 
Future Cars  15.32% 
Genomics  19.20% 
Robotics & Automation  16.13% 
Social Media  16.08% 

 

Region Breakdown

North America  59.16% 
Asia  25.06% 
Europe  14.77% 
MENA  1.01% 

Source: Bloomberg / HANetf. Data as of 31/08/20

 

Fund Details

HAN-GINS Tech Megatrend Equal Weight UCITS ETF (ITEK) is a UCITS compliant Megatrend ETF domiciled in Ireland. Our technology ETF 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

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