October saw the latest launch from Hector McNeil’s ETF white labeller HANetf with the HAN-GINS Innovative Technologies ETF and HAN-GINS Cloud Technology ETF.
These funds are the first ETFs for HANetf’s partners, US firm GinsGlobal Index Funds. The firm’s managing director, Anthony Ginsberg, explains that they manage USD3 billion in index-linked products and mutual funds for a global audience of retail and institutional investors.
Ginsberg’s experience running index products, particularly technology themed products, for large insurance groups such as AIG, Aegon and ING, prompted him to create a European offering in the technology space.
“Hector’s HANetf solution made it easier for us to be up and running within three months of giving them the green light,” he says.
A third product is now on the cards and Ginsberg is optimistic that this will up and out of the door within 90 days. “We like their platform,” he says.
The first two ETFs are based on Solactive indices, with the Innovative Technology index based on an investment universe of developed markets and emerging markets equities which then excludes companies that do not fulfil minimum size and liquidity criteria and then selects companies operating in industries classified as: Robotics and Automation, Future Cars, Cyber Security, Cloud Computing, Genomics and Social Media. As an example, Solactive cites current index components as: Salesforce.com Inc, Amazon Inc, Seattle Genetics Inc, and Fortinet Inc.
The second ETF, the Cloud Technology ETF is based on the Solactive Cloud Technology Index which is free-float market-cap weighted and includes the 50 stocks that are most closely related to the theme of cloud computing.
The index universe consists of stocks listed in developed markets and emerging markets and is based on Solactive’s proprietary ARTISTM (Algorithmic Theme Identification System) technology, a software tool that utilises natural language processing to identify thematic exposures in companies using unconventional data sources. Current index components for this index are for example: Apple Inc, Nvidia Crop, Adobe Systems Inc and Microsoft Corp.
“The Innovative ETF is a key core building block in mega trends with very broad-based innovative themes,” Ginsberg says. “It’s a cornerstone product if you want to participate in this fourth industrial revolution of mega trends that are disrupting the world.”
He enjoyed working with German index providers Solactive, finding them very cutting edge in terms of designing the broad-based thematic innovation index.
“We are not betting the bottom dollar on one particular theme over another,” he says. “It’s a broad-based core holding and interestingly when the market wobbled recently, it was a good buying opportunity for our ETFs as they bounced back very strongly.”
Each bucket within the innovative index has 15 holdings, equally weighted across the themes.
The Cloud ETF has had a significant boost from IBM’s recent purchase of Red Hat.
Ginsberg says: “IBM’s recent USD34 billion acquisition of Red Hat shows them to be a serious global cloud technology contender – placing them amongst the top five cloud players now.
“We understand a few Wall Street analysts have now given their blessing on this IBM strategy and upgraded its outlook. The Red Hat purchase is seen as a serious game changer for IBM. There had been an earlier worry that IBM had possibly missed the boat on Cloud as the Big Three (Amazon, Apple and Microsoft) pulled away from the rest of the pack. This is no longer the case now. Red Hat is a world leader in hybrid cloud – allowing the transfer of data easily between different cloud platforms using open source Linux software.
“So regardless of which leading cloud platform a multinational selects – Amazon, Apple or Microsoft – IBM now stands to benefit. With 60 per cent of IT expenditure globally now being focused on Cloud Technology, IBM is well positioned to benefit.
“Their rerating mirrors similar upgrades enjoyed by Microsoft over the past 12 months, where Microsoft’s market cap doubled in just 18 months on the strength of their Cloud success.”
Cybersecurity and privacy issues drive the growth of cloud technology, Ginsberg says. The big providers are capped at 4 per cent in the ETF: “We are not betting the farm on just four or five big firms.
The Cloud ETF has a portfolio of 15 companies.
“We thought it would be a wonky product that only analysts and professionals would focus on as part of their technology investments but because of lots of mainstream coverage of what’s going on with these themes and more coverage and understanding we are seeing interest from high net worth investors and retail markets through platforms.”
Ginsberg says that while this is not the most conservative investment, it is important to allocate even a small proportion to these trends and massive disruptors.