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.