Tech Megatrend Monthly Report | October

• The Nobel Prize in Chemistry 2020 was awarded to Genomics CRISPR methodology, causing subtheme gains and rerating.[1]
• Fast adoption rates across Digital Entertainment, Cloud Computing, Social Media and Cybersecurity continue as remote working remains mainstream. 
• TESLA hits new record delivery numbers, boosting confidence across the sector.
• The best 2020 subtheme performances were from Genomics, Digital Entertainment, Cybersecurity, Social media and Future Cars. 
• With US exposure below 60% exposure, ITEK is benefiting from Asian and European growth.

Performance Review

HAN-GINS Tech Megatrend Equal Weight UCITS ETF (ITEK) benefited from the enlarged Genomics and Digital Entertainment subthemes.  Genomics is currently our largest weighting ahead of the next rebalance, followed by Robotics, Future Cars and Cloud Computing. For 2020, our Tech ETF is now up 28.82% and over the past 12 months, 44.77%. In 2020, performance across the equally weighted 8 subthemes has been dominated by Genomics (up 41.4%), Digital Entertainment (38.5%), Cybersecurity (38.1%), Social Media (34.2%), Future Cars (29.9%), Cloud Computing (22.0%) and Robotics-AI (17.2%). 

During September, the standout subtheme performers were Genomics (up 10.2%) and Digital Entertainment (3.8%), as the broader tech industry struggled after reaching new highs in August. By early October, our Tech ETF had regained a new all-time high of $12.45, showing a 38.5% gain year to date.[2]

ITEK Monthly Performance

Past performance is no guarantee of future performance.

Source: Bloomberg/HANetf *YTD figures based on 01.01.20 - 30.09.20 **12 Month figures based on 01.10.19 - 30.09.20

The leading performers in September benefited from Work From Home behaviours becoming mainstream and increasingly permanent. Genomics players led the pack, with Immunomedics up 101.3%, Exact Sciences (34.0%), Seattle genetics (23.6%), Beigene (22.7%) and Guardant Health (17.7%). This helped push a number of these into our Top 10 holdings.  Digital Entertainment players, Trade Desk (up 19.8%), Roku (17.1%) and Sea Ltd (8.5%), did well as online streaming of video games goes increasingly global.  New videogame consoles being released by video game heavyweights Microsoft (Xbox) and Sony (WII) are now being released for Christmas, giving a boost to this theme.

Past performance is no guarantee of future performance Source: Solactive Fact Set and Bloomberg. Data as of 30/09/20

Robotics & Automation firms also feature positively in September, led by Keyence (up 12.9%), Mediatek (10.6%), and Fanuc (8.6%).  Social Media saw both Pinterest (up 12.8%) and Twitter (9.7%) post solid gains.  Zoom’s subscriber base continues to hit record highs, powering it to a gain of 20.7%.  Cybersecurity concerns continue to grow with the demand for remote cloud usage raising.[3]

For the year to date, Tesla remains the top performing holding, up 412.8%, followed by cybersecurity firms ZScaler (202.6%) and Crowdstrike (200.2).[4] The pandemic is boosting Genomics counters as the search for a vaccine and personalised medicine needs continue to grow. ITEK contains the majority of leaders across the Fourth Industrial Revolution and shows far less volatility than the top-heavy Nasdaq and MSCI Tech indices. ITEK’s equally weighted approach ensures performance is far more diversified and globally based.

HAN-GINS Tech Megatrend Equal Weight ETF (ITEK) - 1 Year Performance (01.10.19 - 30.09.20)

HAN-GINS Tech Megatrend Equal Weight UCITS ETF - Performance

Total Return NAV to Date (up to 30/09/2020)

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 30/09/20

Innovative Technology News

The gene-editing space has dominated the headlines since the awarding of 2020 Nobel Prize for Chemistry to the pioneers of CRISPR technology. CRISPR (Clustered Regularly Interspaced Short Palindromic Repeats) technology is viewed as a form of “genetic scissors” which focuses on rewriting the code of life. It can change the DNA of animals, plants & microorganisms with high precision. This technology has exploded and is leading to a rerating of the genomics industry.  The trend includes the growth of personalised medicine globally. Doctors are testing it as a cure for genetic disorders such as sickle cell disease and hereditary blindness and plant scientists are using it to create new crops. [5] 

The video gaming market, along with digital/online video streaming, are both set to grow dramatically. The global video game market size was valued at $151.1bn in 2019 and will likely grow at a Compound Annual Growth Rate (CAGR) of 12.9% from 2020 to 2027.[6]

Technological build out is occurring globally due to the growing penetration of internet services and the low cost of access.  The Asian-Pacific region is expected to show the fastest online gaming growth rates, with Latin America and Europe next in line for faster growth rates. Growth rates in these regions will all exceeding US growth rates year on year.

Online music streaming is also enjoying remarkable growth rates - led by Spotify, Apple, Amazon and Tencent.

For illustrative purposes only.

Source: Business Wire https://www.afp.com/en/news/1314/global-online-music-streaming-growth-slowed-down-q2-2020-202010070054741

The global video streaming market was estimated at $42.6bn in 2019 and is expected to reach $50.1bn in 2020. This reflects an estimated compound annual growth rate of 20.4% from 2020 to 2027 – reaching $184.2bn by 2027.[7] 

Innovations, such as Blockchain technology and Artificial Intelligence (AI) –will enhance video quality and boost market growth. AI now plays a key role in video/film editing, cinematography, voice-overs, scriptwriting and video production.

For illustrative purposes only.

Source: Newzoo | 2020 Global Games Market Report

Fund Rebalance News

On September 9th 2020, our Tech ETF was rebalanced as part of the regular twice yearly process. The number of holdings has risen 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.

Key additions include:

• 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). 

• 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, 8 new firms have been included, including Illumina and Agilent both global leaders (US based) in their respective genetic fields of genetic variation analysis and gene quality control/data analysis. 

• 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 ETF.  The 8 subthemes represented are:

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

Constituent News

Following our September rebalance, the largest subtheme weightings are represented by Genomics (16.14%), Robotics-Automation (14.30%), Future Cars (14.17%) and Cloud Computing (13.90%).

The semi-annual equal rebalancing in September will see each subtheme’s weighting subside back to around 14%.

It is gratifying to see our broad-based approach of 8 subthemes being widely represented amongst the top performing holdings in September. Our Top 10 Holdings contains more Genomics companies due to the rerating of the subtheme this past month.  However it still includes a good cross section of holdings from Cloud Computing and Social Media too. 

Following the rebalance, prior Cybersecurity gains enjoyed by the likes of Zscaler and CrowdStrike were reset to around a 1% holding for each firm. This allowed mostly Genomics and Social Media companies to populate our Top 10 holdings by the end of the month. The Cloud outlier was Zoom Video which reported record additions of new paying subscribers and usage, beating analysts expectations.

Asian and European/Russian social media players continue to perform well (Sohu, Sogou, Mail.ru and Yandex). 

While Tesla posted record third quarter 2020 deliveries for its vehicles[8], its stock came off recent highs reducing its weighting and allowing it to fall out of our Top 10.

With current holdings rising to 104 by the end of September, ITEK is well positioned to benefit from any rerating across the tech space. By early October, Cloud Computing and Social Media stocks had recovered much of their September weakness. ITEK offers an increasingly broad diversified play across the entire Fourth Industrial Revolution sphere, with broad global diversification.

ITEK's Top 20 Performance Contributors (%) - September 2020

Past performance is no guarantee of future performance Source of all data: Solactive / FactSet. Data as of 30/09/20

Sub-Theme Performance (%): September 2020

Past performance is no guarantee of future performance.

Source: FactSet/Solactive and Bloomberg Data as of 30/09/20

Fund Details

HAN-GINSTech 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.

• ITEK Factsheet 
• ITEK Video
• ITEK Fund Page

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