Tech Megatrend Monthly Report | May

Learn more about the Technology ETF

• Genomics, Digital Entertainment, Cybersecurity and Robotics/Automation were big winners in April.        
• Cloud Computing spending remains strong and is set to double within 2 years (exceeding $500bn annually)        
• Genomics has been rerated and is increasingly mainstream in detecting and curing medical diseases.        
• Digital Entertainment remains a key beneficiary from COVID lockdowns as 50 million more Americans played games in 2020.        
• Blockchain remains the Technology ETF’s top performer in 2021, despite falling in April.        
• For 2021, Genomics and Digital Entertainment are the other best performing subthemes.        
• Blockchain will broaden out its uses - as digital payments/fintech services rise in popularity.        
• Biden’s huge stimulus plans are boosting spending on Future Cars, Cybersecurity and Genomics

Tech Megatrend ETF (ITEK) Returns

Past performance is no guarantee of future performance. Source: Solactive, HANetf *12 Month figures based on 30.04.20 - 30.04.21

Performance Review

HAN-GINS Tech Megatrend Equal Weight UCITS ETF (ITEK) gained 2.90% in April and is up 12.49%for 2021.  ITEK continues to benefit from fast adoption rates across the Digital Revolution. 

For 2021, Blockchain is up 55.5%, Genomics 14.5%, Digital Entertainment 9.2% and Robotics/Automation 6.9% - our winning themes.  Despite April being a poor month for Blockchain down 12.1% - Genomics, Cybersecurity and Cloud all enjoyed very good gains up 10.2%, 8.5 and 5.6%.

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 10.6%-13.7% weightings within ITEK. ITEK has beaten most competitors over YTD, 6 months and 1 year.

Impressive April gains for a large number of Genomics players included BioNTech (up 72.4%), Curevac (27.9%) and Mettler (13.6%).  These benefited from a strong rerating as COVID vaccine rollouts occurred globally and biotech is increasingly seen as a mainstream medical solution.

Robotics and Automation was another leading subtheme performer.  Top performers were Mediatek (up 24.9%), Intuitive Surgical (up 17.1%), Will Semiconductors (19.3%) and NVIDIA (12.5%).  Digital Entertainment players also showed strong performance this month led by Evolution Gaming up 34.7%, Mango Media 18.5% and Sea Ltd up 13.1%.  Cybersecurity saw top performance form Proofpoint (36.8% gain), Okta 22.4% and Fortinet 10.7%.

Past performance is no guarantee of future performance. Source of all data: Bloomberg. Data as of 30.04.2021

HAN-GINS Tech Megatrend Equal Weight UCITS ETF

– Performance As of 30.04.21

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 30/04/2021

Industry News

China is likely to control four times the global market share of Electric Vehicles compared to the US.  President Biden is using all the levers of government, from purchasing power, R&D, tax, trade, and investment policies to ensure America become the world’s leader in EV manufacturing, including all input materials and parts.

The Biden Plan targets $174bn to encourage the development, manufacture and purchase of EVs – via tax credits and incentives.[1]  This includes $15bn for government agencies to purchase EV car fleets, big subsidies for 500,000 EV charging stations[2], and a large training program – the EV Infrastructure Training Program (EVITP).  The target includes all new US-built buses being zero-emissions by 2030.[3]

The recent Colonial Pipeline cyberattack, following so closely on the large Solar Winds attack on US government data/IT systems, is driving more businesses to upgrade their cybersecurity. Our holdings such as Crowdstrike and Palo Alto Networks are well positioned to benefit from this renewed growth in 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 BionTech and Illumina are well positioned as Gene Therapies become mainstream in the detection of diseases and play a key role in Precision (customised) medicine.

Constituent News

ITEK’s global mix of 114 holdings is representative of the Digital Revolution. Our US exposure is currently 58.7%, with Asia 24.8% and Europe at 15.4%.  Most of our Top 10 holdings are between 1.0% - 1.4%, prior to rebalance and equal weighting. 

• ITEK is equally weighted across all 8 subthemes and 114 underlying holdings.       
• It is a rules-based index with broad diversification.        
• Holdings of up to 15 per subtheme, are equally weighted too.       
• ITEK’s Top 5 holdings equal just 7%, and Top 10 only 12.3% of its portfolio.        No overweight or concentrated positions.        
• Provides equal exposure to all key Digital Revolution themes.        
• ITEK is considerably underweight large Megacaps compared to competitors.       
• Unlike Nasdaq and other tech benchmarks which remain very overweight a few Big Tech players, ITEK’s FAANG exposure remains under 7% - versus 40% in the Nasdaq 100. 

Top performers in the first four months of 2021 include: Riot Blockchain up 146.2%, BioNTech 131.0%, Evolution Gaming 95.5%, Galaxy Digital 113% (also our largest holding) and, Mediatek (59.7%), Volkswagen (39.9%) and Fortinet 37.5%.  A number of our themes are contribution to performance.  The biggest single addition was adding 11 new Blockchain holdings in March – resulting in 13 total such holdings. 

ITEK is a unique Tech ETF by adding Blockchain holdings as an entirely separate subtheme. 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. 

Outlook

Biden’s huge clean energy and infrastructure plans will boost EV spending dramatically.  The US government banning the sale of traditional gas cars from 2035 - is fast-tracking EV adoption rates.

Remote WFH behaviours will ensure 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.

The move away from hardware and onsite servers to remote usage means Cloud is being hardwired into most corporation’s operations and software systems.

Demand for cybersecurity is expanding and likely to also be big beneficiary of the WFH trends along with increasingly large cyberattacks.  The Biden Administration is planning for big cybersecurity spending outlays, likely to exceed $10bn this year.

Blockchain will become more mainstream as digital fintech/global payments become the norm. If Cryptocurrencies were a car, then Blockchain is its motor.  Key areas of Blockchain are 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 $176bn worth of business value by 2025 and $3.1 trillion by 2030.