Investors can target next-gen leaders with a targeted exchange traded fund strategy to enhance portfolios while targeting the entrepreneurship economy.
“According to ERShares’ research, from decades together founder-run Entrepreneurial companies have shaped the economy by investing in its people and in innovation leading to exceptional growth,” Dr. Joel Shulman, Founder, Managing Partner & CIO, ERShares, said in the recent webcast, Incorporating Entrepreneurial Leadership in Your 2021 Portfolio.
When most businesses were shutting down in 2020, Shulman pointed out that entrepreneurs everywhere sprung into action to help global economies keep moving. Investors noticed, with entrepreneurial companies up above 70% for the year. Entrepreneurial Companies were better able to shift gears to adapt to the new market environment, swiftly pivoting their strategies to protect people from the pandemic and support people to adapt to new routines of living.
Shulman highlighted the trend toward technology and healthcare opportunities. The top 20 performers in the Russell 1000 Index in 2020 were all Entrepreneurial Companies, or companies that improved people’s lives through innovation.
The entrepreneurial theme was not geographically constrained. Entrepreneurial Companies led the way irrespective of market cap and geography, and the global companies pivoted well during uncertain markets and outperformed in bull markets.
Looking ahead, Eva Ados, Chief Operating Officer, ERShares, said that ERShares research shows categories including cloud computing, nextgen transportation, digital economy, nextgen communication, green energy, 3D printing, fintech, interactive entertainment, e-commerce, nanotechnology, artificial intelligence, medtech, intelligent manufacturing, and genetic engineering are poised to outperform in 2021.
Shulman underscored the diversification benefits of including the entrepreneurial investment theme into a well-rounded portfolio. Entrepreneurial companies in 2020 had lower risk with a beta of 0.789 relative to their benchmarks.
“The ERShares Entrepreneur Factor delivered strong performance across a variety of investment strategies without disrupting investors’ underlying risk profile metrics,” Shulman said.
Two ETFs to Capture Entrepreneurship
As a way to capture this growth strategy, investors can look to the Entrepreneur 30 Fund (NYSEArca: ENTR). The ERShares International Equity ETF (NYSEARCA: ERSX) also captures entrepreneurship of the international variant.
“At ERShares, we discover future game changers from around the world. With AI technology, we analyze more than 55,000 companies globally and the companies that meet our Entrepreneur factor threshold, become part of our holdings,” Ados said.
The ETFs’ indexing methodology incorporates the ERShares Entrepreneur Factor, which delivers strong performance across a variety of investment strategies without disrupting investors’ underlying risk profile metrics.
The ERShares methodology also looks for characteristics like organizational dynamics, global perspective, integrated trusted leaders, visionary leadership, disruptive entrepreneurial mindsets, and innovative implementations.
ERShares incorporates a bottom-up investment orientation, powered by artificial intelligence, that stands above other investment factors such as momentum, sector, growth, value, leverage, market cap (size), and geographic orientation. With the aid of AI and Thematic Research, ERShares incorporates a macro-economic, top-down approach that integrates changing investment flows, innovation entry points, sector growth, and other characteristics into a dynamic, global perspective model.
Lastly, these companies adhere to environmental, social, and governance principles.
“Our investment philosophy is steeped in the belief that Entrepreneurial leaders establish organizations with Environment, Social and Governance (ESG) benefits. They build high potential growth organizations with relatively modest impact on the environment while creating lots of jobs and strong organizational governance,” Shulman said.
Financial advisors who are interested in learning more about entrepreneurial companies can watch the webcast here on demand.