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Sept. 16, 2021, 9:00 a.m. EDT

Goldman creates equity ETF targeting future tech leaders beyond U.S. megacaps

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By Christine Idzelis

Goldman Sachs Group has created an exchange-traded fund targeting the next generation of technology companies that will lead innovation, hunting globally for returns beyond the most popular names in Big Tech. 

The actively managed Goldman Sachs Future Tech Leaders Equity ETF will invest in listed companies with a market value of less than $100 billion, steering away from U.S. megacap tech stocks, according to a statement from Goldman /zigman2/quotes/209237603/composite GS -0.49% on Thursday. The new ETF, which will trade under the ticker GTEK, seeks positions in companies in developed and emerging markets.

“We’re helping our U.S. clients get invested beyond the existing tech incumbents,” said Katie Koch, co-head of Goldman Sachs Asset Management’s fundamental equity business, during a media briefing on the new ETF. “The world is changing very rapidly.”

A decade from now, the list of dominant tech companies will look “very different” than today, said Koch, with Goldman expecting it to be more global. Yet Goldman has come across many U.S. clients with more capital allocated to one of the big tech stocks in the group known as FAANG — Facebook /zigman2/quotes/205064656/composite FB -0.07% , Apple /zigman2/quotes/202934861/composite AAPL -0.53% , Amazon.com /zigman2/quotes/210331248/composite AMZN +0.45% , Netflix /zigman2/quotes/202353025/composite NFLX +3.78% and Google parent Alphabet /zigman2/quotes/202490156/composite GOOGL -0.46% /zigman2/quotes/205453964/composite GOOG -0.20% — than the rest of the “tech ecosystem,” she said.

Many investors are overexposed to U.S. megacap tech stocks, according to Koch. She said the top 1% of stocks in the S&P 500 — the U.S. large-cap benchmark whose biggest sector is information technology — represent almost a quarter of the index’s market capitalization. Goldman’s ETF aims to help investors diversify their portfolios and position them on “the right side of disruption,” Koch said.

“We’re now at a key inflection point where that innovation is expanding beyond the U.S. and down the market-cap spectrum,” Sung Cho, a portfolio manager of the new exchange-traded fund, said during the call. 

The massive number of people carrying around smartphones globally has opened up investment opportunities, including in areas such as e-commerce, payments and online entertainment, according to Brook Dane, also a portfolio manager of the ETF. Public cloud technology has meanwhile globalized innovation, allowing new businesses to open anywhere and grow without vast sums of capital, Dane said on the call.

“Digital transformation,” which may be expressed through software holdings, and cybersecurity are other areas identified by the fund, according to Dane. He said the COVID-19 crisis that began last year has spurred companies to plan for increased tech spending, partly because they want more modern, flexible software systems.

Cho, meanwhile, pointed to opportunities in fintech as well as “smart components” that are primarily semiconductors. He said the “semi shortage” for electronics and cars during the pandemic has shown how critical semiconductors are.

Entegris /zigman2/quotes/200628784/composite ENTG +0.85% , a company in the semiconductor sector, and Bill.com /zigman2/quotes/215406166/composite BILL +4.42% , a company that’s a leader in “business-to-business digitization of payments,” are among the holdings of the new ETF, Cho said. Cybersecurity vendor Palo Alto Networks /zigman2/quotes/207599953/composite PANW -0.87% is another example of a company in its portfolio, according to Dane.

Meanwhile, the S&P 500 /zigman2/quotes/210599714/realtime SPX -0.03% rose 0.9% Wednesday, posting a 19.3% gain so far this year, according to FactSet data. The tech-heavy Nasdaq Composite index /zigman2/quotes/210598365/realtime COMP +0.30% advanced 0.8% Wednesday for a year-to-date gain of 17.6%.

/zigman2/quotes/209237603/composite
US : U.S.: NYSE
$ 405.89
-2.00 -0.49%
Volume: 1.24M
Oct. 21, 2021 2:08p
P/E Ratio
6.68
Dividend Yield
1.97%
Market Cap
$138.59 billion
Rev. per Employee
$1.31M
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/zigman2/quotes/205064656/composite
US : U.S.: Nasdaq
$ 340.55
-0.23 -0.07%
Volume: 7.44M
Oct. 21, 2021 2:08p
P/E Ratio
25.24
Dividend Yield
N/A
Market Cap
$960.81 billion
Rev. per Employee
$1.47M
loading...
/zigman2/quotes/202934861/composite
US : U.S.: Nasdaq
$ 148.47
-0.79 -0.53%
Volume: 42.46M
Oct. 21, 2021 2:08p
P/E Ratio
29.08
Dividend Yield
0.59%
Market Cap
$2467.29 billion
Rev. per Employee
$1.86M
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/zigman2/quotes/210331248/composite
US : U.S.: Nasdaq
$ 3,430.31
+15.25 +0.45%
Volume: 1.20M
Oct. 21, 2021 2:08p
P/E Ratio
59.84
Dividend Yield
N/A
Market Cap
$1729.52 billion
Rev. per Employee
$297,430
loading...
/zigman2/quotes/202353025/composite
US : U.S.: Nasdaq
$ 648.74
+23.60 +3.78%
Volume: 6.10M
Oct. 21, 2021 2:08p
P/E Ratio
58.49
Dividend Yield
N/A
Market Cap
$276.68 billion
Rev. per Employee
$2.66M
loading...
/zigman2/quotes/202490156/composite
US : U.S.: Nasdaq
$ 2,822.25
-13.13 -0.46%
Volume: 692,574
Oct. 21, 2021 2:08p
P/E Ratio
30.62
Dividend Yield
N/A
Market Cap
$1894.64 billion
Rev. per Employee
$1.35M
loading...
/zigman2/quotes/205453964/composite
US : U.S.: Nasdaq
$ 2,842.51
-5.79 -0.20%
Volume: 425,803
Oct. 21, 2021 2:07p
P/E Ratio
30.82
Dividend Yield
N/A
Market Cap
$1894.64 billion
Rev. per Employee
$1.35M
loading...
/zigman2/quotes/200628784/composite
US : U.S.: Nasdaq
$ 131.94
+1.11 +0.85%
Volume: 335,984
Oct. 21, 2021 2:08p
P/E Ratio
52.97
Dividend Yield
0.24%
Market Cap
$17.74 billion
Rev. per Employee
$320,571
loading...
/zigman2/quotes/215406166/composite
US : U.S.: NYSE
$ 308.82
+13.06 +4.42%
Volume: 636,042
Oct. 21, 2021 2:08p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$29.34 billion
Rev. per Employee
$172,157
loading...
/zigman2/quotes/207599953/composite
US : U.S.: NYSE
$ 507.49
-4.43 -0.87%
Volume: 1.30M
Oct. 21, 2021 2:08p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$49.86 billion
Rev. per Employee
$406,388
loading...
/zigman2/quotes/210599714/realtime
US : S&P US
4,534.92
-1.27 -0.03%
Volume: 1.15B
Oct. 21, 2021 2:08p
loading...
/zigman2/quotes/210598365/realtime
US : Nasdaq
15,167.51
+45.83 +0.30%
Volume: 3.07M
Oct. 21, 2021 2:08p
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