In 2015, few investors had heard of companies like Atlassian, Veeva Systems and Twilio. Yet these firms went on to post stunning growth rates as they built ground-breaking new platforms that disrupted once-staid industries. And their shares have surged three or fourfold since then, creating tens of billions in shareholder value. 

Trouble is, you won’t find firms like these in some of the major tech-focused exchange-traded funds that own outsized positions in mega-cap tech stocks like Microsoft, Apple and Cisco Systems. And that’s created an opening for other ETF sponsors to launch much more targeted funds that can profit from the upstarts that are driving today’s key tech trends.

For sure, focusing on leading-edge tech doesn’t always translate into outsized market gains. One example is the Robo Global Robotics and Automation Index ETF (ROBO). This thematic ETF launched in 2013 and has delivered a middling 7 percent annual return over the past five years. And this has come during an epic bull market for tech stocks. It turns out that particular tech trend has not been a dominant focus area for many IT budgets.

Catch the right tech theme however, and you can really strike gold. The First Trust Cloud Computing ETF (SKYY), for example, has soared at a 25 percent annual clip during the past three years. That kind of performance has helped the fund attract $2.2 billion in assets, despite a 0.60 percent expense ratio.

Hoping to ride herd on that success, a growing number of ETF sponsors have got in on the action by launching their own tech thematic products over the past year. For example, BlackRock is in the midst of launching a series of new ETFs that capture “megatrends.” The first few funds in this new family include the iShares Cybersecurity and Tech ETF (IHAK) and the iShares Genomics Immunology and Healthcare ETF (IDNA).

With 0.47 percent expense ratios for those funds, iShares clearly aims to undercut similar offerings such as the ETFMG Prime CyberSecurity ETF (HACK) and the ARK Genomic Revolution ETF (ARKG), which carry expense ratios of 0.60 percent and 0.75 percent, respectively.

Elsewhere, other ETFs have taken aim at the current era of disruptive technology trends. The WisdomTree Modern Tech Platforms Fund (PLAT), which launched in May, and the Horizons Industry 4.0 Index ETF (FOUR), which debuted in November and trades on the Toronto Stock Exchange, both invest in companies that potentially could deliver outsized growth—and investment returns—for years to come.

The WisdomTree fund is off to a slow start with just $2.6 million in assets, but it has a strong investment case.

WisdomTree’s global research chief, Jeremy Schwartz, says that a successful platform can have a very long cycle extending a decade or more. PayPal is an example of a platform that has delivered long-term upside performance. The provider of online and mobile payments was launched two decades ago and is still growing in excess of 15 percent per year. The average holding in the PLAT fund has been boosting sales at a 19 percent annual pace, and more than a third of the fund is invested in the communications services industry.

Notably, the PLAT fund avoids making outsized bets on any single dominant tech firm. Instead, the fund has less than two percent of its assets invested in any of its 69 holdings, many of which are aimed at distinct industries.

Schwartz notes that “technology is now transforming almost every major industry you can think of.” And he says the best tech firms share several key traits.

“They don’t require a heavy slate of assets to flourish, they connect users in a seamless way, they’re displacing entrenched legacy firms that failed to innovate and they can generate tremendous scale economies,” he says. Those traits, he adds, enable them to build long-term sustainable platforms for growth.

Here Comes 4.0

The Horizons Industry 4.0 Index ETF takes an equally compelling approach. The term “4.0” refers to a “confluence of some very important tech trends that have come into alignment,” says Hans Albrecht, a portfolio manager at Horizons.

Rapid advances in chip technology are helping software to comb through vast troves of information on an almost instantaneous basis. Albrecht notes that “90 percent of the world’s data has been created in just the past two-and-a-half years.”

How that data gets harnessed holds the key to major changes in a range of industries. Take self-driving vehicles as an example. An automobile’s ability to exchange information with adjacent vehicles—as well as cloud-based servers—is expected to usher in a new era of autonomy (i.e., a vehicle's ability to operate without any driver input) and safety. 

Why is now a good time to focus on this transformation? “Because the cost of so many kinds of hardware, such as robots, are falling at a very fast pace,” says Albrecht, adding that should spur much greater adoption of these new kinds of technologies.

Like with the WisdomTree fund, the FOUR ETF takes an equal-weight approach, though it rebalances quarterly (instead of annually as with the PLAT fund).

Albrecht thinks the FOUR ETF brings a very different exposure than a broad-based, larger fund like the massive Invesco QQQ Trust (QQQ), which has nearly $75 billion in assets. He posits that the QQQ fund lacks sufficient exposure to Industry 4.0 niches such as robotics, cutting-edge semiconductors, mobile plays and security.

Time will tell if the newest wave of thematic tech ETFs will deliver the robust gains they are aiming for. But it’s clear that many of the major tech trends playing out today should continue to have a transformative role in the global economy for the foreseeable future.