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Tech Megatrend Monthly Report | February

 

  • Record Cloud Computing earnings have been reported globally, with Asia-Pacific showing the fastest growth.
  • Gene Sequencing enjoys a rerating, becoming more mainstream for medicine.
  • Future Cars are benefiting from Biden’s Green/Climate friendly policies.
  • Our technology ETF is increasingly global – with US exposure under 57% and Asia approaching 30%.
  • Digital video streaming platforms such as Netflix and Disney+ hit new subscriber records in the past quarter.

 

Performance Review

HAN-GINS Tech Megatrend Equal Weight UCITS ETF (ITEK) impressed with a 4.2% gain in January - benefiting from fast adoption rates across the Digital Revolution. ITEK’s equal weighting of eight key subthemes ensures it captures many of these gains. Our technology ETF returned 64.8% over the past 1-year period. 

 

Tech Megatrend ETF (ITEK) Returns

January

12 Month*

4.17%

64.82%

Past performance is no guarantee of future performance. Source: Bloomberg, HANetf *12 Month figures based on 31.01.20 - 31.01.21.

 

For January, Blockchain was the standout subtheme gaining 13.6%, followed by Future Cars up 6.8%, Genomics 5.6%, Digital Entertainment 4.4%, Cyber Security 2.7% and Social Media 1.3%.

Due to recent monthly gains Future Cars, Digital Entertainment and Genomics remain our largest subtheme weightings ahead of the next index rebalance.

The Biden Administrations green energy approach is favouring Future Cars, with likely subsidies being offered to boost demand for EV vehicles. A huge spike in online/mobile gaming, partly funded through advertising, has boosted its weighting.  Impressive January gains for BioNTech, Baidu, NIO, Crowdstrike, Bilibili, Riot Blockchain attest to the breadth of the Digital Revolution and reratings that have occurred.   Asian companies now represent almost 30% of ITEK, with the US just below 57% for the first time.

Megatrend Sub-theme

Total Return (%)

% Average Weight

Performance of category

Genomics

0.79

14.16

5.58

Digital Entertainment

0.62

14.21

4.36

Robotics & Automation

0.06

13.38

0.45

Blockchain

0.75

5.50

13.64

Future Cars

1.09

16.03

6.80

Cloud Computing

0.01

10.73

0.09

Social Media

0.15

11.31

1.33

Cyber Security

0.34

12.47

2.73

Past performance is no guarantee of future performance. Source:  Solactive, Data as of 31.01.21

 

HAN-GINS Tech Megatrend Equal Weight UCITS ETF – Performance

As of 31.01.21

 

1M

3M

6M

YTD

12M

SI

HAN-GINS Tech Megatrend UCITS ETF

4.17%

29.45%

35.45%

4.17%

64.82%

93.15%

Solactive Cloud Technology Index (NTR)

4.22%

29.67%

35.77%

4.22%

65.56%

95.57 %

Performance before inception is based on back tested data. Back testing is the process of evaluating an investment strategy by applying it to historical data to simulate what the performance of such strategy would have been. Back tested data does not represent actual performance and should not be interpreted as an indication of actual or future performance. Past performance for the index is in USD. 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 31/01/2021

 

Industry News

The new Biden Administration’s embrace of Green Energy is boosting demand for Future Cars.  This is helping rerate a number of our holdings across this subtheme.  Highlights include:

  • Big US & EU push to remove petrol/gas cars by 2035
  • Volvo’s EV sales already represent one-third of total revenues and will rise to 50% by 2025[1]
  • Volkswagen, Ford and GM are seeking to work with leading software firms including Microsoft[2] and Google[3] 

 

Five Reasons Tesla is Undervalued long-term in our view:

  • Tesla is far more than a carmaker- they are increasingly robots on wheels
  • While other carmakers struggle to integrate 3rd party software, Tesla has been doing this inhouse for years
  • Tesla's self-driving car will likely challenge ride-sharing apps Uber & Lyft in just a few years
  • Battery and AI technology provides it with a wide moat currently
  • We expect production to ramp up to 5million+ vehicles annually within the next few years

 

Digital Entertainment continues to be a huge beneficiary of COVID and is experiencing exponential growth.

  • Gaming now 3X larger than Hollywood movie industry and is growing faster[4]
  • Online video streaming has seen Netflix hit almost 200 million total subscribers which is a record[5]

 

Lastly, Cloud growth is assisting Cybersecurity firms too.  Remote work is boosting demand for Cybersecurity services

  • Asia Pacific is the fastest growing for both Cloud and Online Gaming[6]
  • Amazon’s Cloud unit AWS now represents ~60% of all Amazon's total profits[7]
  • Cloud profit margins are amongst the highest in IT due to the reliable, fast growing subscription model

 

Constituent News 

ITEK’s global mix of 103 holdings, is representative of the Digital Revolution. Our US exposure is currently just 56.7%, with Asia 29.8% and Europe at 12.7%.  Most of our Top 10 and largest holdings are between 1.2% - 2%, prior to rebalance and equal weighting.  This is in stark contrast to the Nasdaq 100 and other technology benchmarks which are very overweight a few Big Tech firms.  Our FAANG exposure is under 7% versus the Nasdaq 100 at approximately 40%. 

Our top performing contributors are listed below for January by subtheme and holdings.  Clearly holdings in Future Cars, Genomics, Cybersecurity and Digital Entertainment had the largest number of top contributors, although Riot Blockchain again led the pack with a 20.8% return.  Genomics players BioNTech, Guardant Health and Beigene gained 43.5%, 20.7% and 21.1% respectively.

Other star performers in January included Bilibili the Chinese gaming firm (up 32.9%), Fastly (up 25.2% Cybersecurity), Nio 17.0% the Chinese EV car maker and Roku the US digital entertainment firm (17.2%).

As the demand for digital ledgers and currencies grow during COVID, we expect further Blockchain firms to join ITEK’s holdings at our next rebalance.

Past performance is no guarantee of future performance. Source: Solactive. Data as of 31.01.21

Top Contributors – January 2021

Holdings

Index Category

% Average Weight

Total Return (%)

Contribution to Return (%)

RIOT BLOCKCHAIN INC

Blockchain

4.52

20.78

0.74

BILIBILI INC ADR

Digital Entertainment

1.76

32.86

0.43

BIONTECH SE-ADR

Genomics

1.17

43.45

0.43

NIO INC - ADR

Future Cars

2.16

16.95

0.31

ROKU INC

Digital Entertainment

1.63

17.17

0.24

GUARDANT HEALTH INC

Genomics

1.12

20.65

0.20

MEDIATEK INC

Robotics & Automation

1.15

17.46

0.19

SANGFOR TECHNOLOGIES

Cyber Security

0.97

21.68

0.19

FORD MOTOR CO

Future Cars

1.05

19.8

0.18

FASTLY INC - CLASS A

Cyber Security

0.73

25.16

0.17

BEIGENE LTD

Genomics

0.93

21.08

0.16

SAMSUNG SDI CO LTD

Future Cars

1.25

13.53

0.15

HYUNDAI MOTOR CO

Future Cars

1.05

15.85

0.14

NETEASE INC

Digital Entertainment

0.78

20.73

0.14

TESLA INC

Future Cars

1.18

12.45

0.12

BAIDU INC - SPON ADR

Social Media

1.57

8.68

0.11

Past performance is on guarantee of future performance. Source: Solactive. Data as of 31.01.21

 

Outlook

We believe the latest wave of COVID-19 ensures that remote technology trends are now mainstream and unlikely to be replaced post vaccines.  Workers behaviours appear changed for good, with many committing to only return to office-based settings for part of the week.

Cloud Computing spending will continue to boom as corporate IT departments continue to reduce their hardware footprint. Cybersecurity is repeatedly feeding off this remote trend and more cloud firms are entering the security space seeking to offer a one-stop solution.  These areas are more closely bound than ever before and should track each other’s continued growth. 

Cloud growth outside the US will continue to exceed IUS growth, especially across Asia and likely Africa too.

Social Media and Digital Entertainment are scaling up globally too.  Gaming had its most profitable year ever in 2020 with half the industry’s revenue coming from Asia.  Online gaming now represents a majority of Gaming revenue and we expect Amazon and other Big Tech firms to try to grow this area.

Big Tech is also likely to become more focused on Healthcare across Telemedicine, Gene Editing, Wearables/Trackers and Hospital administration which has seen an explosion in cloud usage.

We expect significantly more M&A corporate activity in the cybersecurity and healthtech areas.

In the future cars space, Tesla is planning to aggressively launch its EV Truck solution.  While Apple has agreed to work with Hyundai on a likely Apple Car.  Autonomous cars will significantly disrupt the taxi and ride-sharing industries in future years.

 

Product Details 

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

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

Visit the ITEK Fund Page for more information.

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