Tech Megatrend Monthly Report | April

• Cloud Computing spending is set to double within 2 years (exceeding $500bn annually)        
• Genomics increasingly mainstream in detecting and curing medical diseases       
• Digital Entertainment is a key beneficiary from the lockdowns as 50 million more Americans played games in 2020        
• Blockchain remains the Technology ETF’s top performer in 2021, followed by Future Cars and Genomics       
• Blockchain’s size is expected to grow from $3bn in 2020 to $39.7bn by 2025, a CAGR of 67.3%       
• Biden’s Stimulus plan is set to boost spending on Future Cars and Genomics

Tech Megatrend ETF (ITEK) Returns

Past performance is no guarantee of future performance. Source: Solactive, HANetf *12 Month figures based on 01.04.20 - 31.03.21

Performance Review

The HAN-GINS Technology ETF (ITEK) lost 1.4% in March after an impressive 6.4% gain in February. The Technology ETF continues to benefit from fast adoption rates across the Digital Revolution.  Over the past 12 months it has more than doubled – gaining 104.0%. 

For March, Blockchain remained our standout subtheme, gaining 9.5%, followed by Robotics (1.8%) and Genomics (0.6%).  Social Media and Digital Entertainment were our two weakest performers, although both are up for 2021 overall.

Due to recent rebalance, our equal weighted approach ensures that all our eight subthemes are all currently between 12%-13% weightings within ITEK.  For 2021 Blockchain is our standout theme, up 77.5%, followed by Future Cars (7.9%) and Genomics (4.0%).

Future Cars will significantly benefit from the new Biden stimulus package – with estimated subsidies of $7,500 per car.  A number of traditional carmakers have made huge commitments to EV vehicles (below).  Gene Sequencing and genomics will also receive significant Federal support now, as it has become increasingly mainstream in the fight against COVID and other diseases including cancer. 

Blockchain is benefiting hugely from the increased demand for digital wallets rises alongside cryptocurrency valuations spiking. The successful listing of Coinbase, approximating a $100bn value, will help mainstream the use of cryptos and become a respected blockchain component.  Riot Blockchain up 213.5% in 2021 is ITEK’s top performing holding, followed by Digital Entertainment players Evolution Gaming (up 45.1%) and Bilibili (24.9%).  For the month RIOT jumped 21.8%, but was outpaced the following Blockchain holdings – Voyager (81.5%), Marathon (68.4%) and Galaxy (51.3%).

Impressive March gains for a large number of Future Car players include Volkswagen (up 33.6%), NXP Semiconductors (10.6%) and Ford (8.1%).  Genomics players also showed strong performance this month – 10X Genomics (up 28.3%), Celltron Healthcare (7.5%) and Curevac (14.6%). 

Past performance is no guarantee of future performance. Source of all data: Bloomberg. Data as of 31.03.2021

HAN-GINS Tech Megatrend Equal Weight UCITS ETF

– Performance As of 28.02.21

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 31/03/2021

Industry News

Blockchain holdings are benefiting substantially from the rerating of cryptocurrencies and increased demand.  

The Biden Administration’s embrace of Green Energy and Gene Sequencing has helped rerate ITEK’s holdings across Future Cars and Genomics.  The stimulus package is providing huge subsidies to carmakers and genomics funding.

Genomics holdings such as Illumina, a leader in PCR testing is rolling out these tests – helping early detection of mainstream diseases such as cancer. Precision (customised) medicine will increasingly be driven by genomics.

Cloud spending continues to far outpace traditional non-Cloud IT spending.

Cloud’s global growth is likely to be powered by 5G and AI improvements, along with adoption of Hybrid (or Multi-Cloud).  IBM has staked its future on this area and enjoyed a rerating in March.  While Amazon’s Cloud unit AWS now represents almost 60% of all Amazon's total profits, the Cloud subscription model ensures its profit margins are amongst the highest in IT.   

Volkswagen, Ford, Volvo and other traditional carmakers have committed to large rollouts of new EV models in the next few years.  This has boosted their valuations and as their commitment to the future car space has risen.   

Tesla hit new delivery records for the 1st quarter, with many analysts raising their price estimates. Tesla, while flat for March, has enjoyed a positive price rebound in April.  Its German, Chinese and new Texas factories are scaling up to new production heights. Tesla's self-driving car will likely challenge ride-sharing apps Uber & Lyft in a few years.  Battery and AI technology provides it with a wide moat currently.

Big Tech players are targeting both the online gaming market for their cloud services as well as the healthcare space. Microsoft is purchasing Bethesda Games for over $7.5bn and Nuance for $16bn.  Gaming is approaching four-times the size of the Hollywood movie industry - and is growing far faster!

Constituent News

ITEK’s global mix of 114 holdings is representative of the Digital Revolution. Our US exposure is currently 59.4%, with Asia 24.9% and Europe at 14.7%.  Most of our Top 10 and largest holdings are between 1.0% - 1.6%, prior to rebalance and equal weighting. 

Eleven new Blockchain holdings were added in early March – to better represent this subtheme and bring the total number to 13.  ITEK is a unique Tech ETF by adding Blockchain holdings as an entirely separate subtheme.

ITEK’s top 3 monthly performers are from Blockchain, due to its significant rerating.  Our holdings are not all heavily correlated to cryptocurrencies, but we do hold crypto miners, administrators and other digital ledger players.

As the demand for digital ledgers and cryptocurrencies grow during COVID, we expect two more Blockchain firms to join ITEK’s holdings at our next rebalance, rounding out this subtheme at 15 holdings. 

Unlike the Nasdaq 100 and other technology benchmarks which are very overweight a few Big Tech players, ITEK’s FAANG exposure remains under 8% currently versus the Nasdaq 100 at approximately 40%. 

Our top performing contributors are listed below for March - by subtheme and holdings.  IBM enjoyed a rerating in the Cloud space as it seeks to become the global leader in hybrid cloud. CISCO up 15.2% was another standout in Cloud, while Digital Entertainment, Robotics and Future Cars and Genomics represented most of the other top gainers last month. 

Outlook

As new remote work patterns gain traction over the medium term, Cloud Computing spending continues to dominate – exceeding all non-Cloud spending on IT.  AI and 5G are facilitating the expansion of Edge computing which will boost Cloud spending.  The majority of corporate IT budgets are now devoted to Cloud spending.

Cybersecurity is likely to be a big beneficiary of the WFH trends given the largest ever cyberattack recently on the US Government (Solar Winds).  The Biden Administration is planning for big cybersecurity spending outlays, likely to exceed $10bn this year.

The size of Blockchain is expected to grow from $3bn in 2020 to $39.7bn by 2025 - a CAGR of 67.3%.

Blockchain is the underlying technology powering Cryptocurrencies, but has many other uses.  If Cryptocurrencies were a car, then Blockchain is its motor.  Key areas Blockchain is already playing a role:  Digital IDs, Rewards/Loyalty programs, Copyright protection, Digital voting, Real estate transfers, Medical records, Wills.

According to Gartner Research, blockchain technology is expected to create more than $176 billion dollars’ worth of business value by 2025 and $3.1 trillion by 2030.