ETF investors who are interested in the potential growth opportunities in the century ahead should consider an investment strategy that will stay ahead of the curve.
“Investors can employ sectors to potentially capture shifts in fundamentals, business cycles and harness thematic trends, as sectors are closely aligned to specific economic variables,” Matthew Bartolini, Head of SPDR Americas Research for State Street Global Advisors, said on the recent webcast, The New Economy is Trending Towards Innovation.
However, Bartolini explained that the definition of sector investing is quickly evolving as the economy witnesses rapid changes brought on by innovative technologies disrupting society. The traditional GICS sector breakdown can effectively group companies impacted by similar macroeconomic changes, but the categorization may not properly identify future trends in a rapidly evolving marketplace. Consequently, investors will require a different and forward looking approach to capture the structural changes underway.
Bartolini argued that we are entering the “Fourth Industrial Revolution”, which presents huge opportunities to improve all our lives, and investors will have to adapt their portfolios accordingly to tap into this growth opportunity.
For example, investors who are considering future drivers of the economy that may be overlooked by traditional methodologies should consider the nascent industries associated with themes like artificial intelligence, hyperconnectivity, exponential processing power, robotics, automation and democratized infrastructure.
“We are now at the dawn of a new revolution,” John van Moyland, Head of Financial Products at Kensho Technologies, said. “Mutually reinforcing catalysts are driving innovation at an unprecedented rate and breadth, transforming industries and creating new ones.”
Cutting Edge Technology, Innovative Indexing
To help investors better categorize and capture these developing industries, Kensho has incorporate cutting edge technology with an innovative indexing methodology to play companies and the ecosystems supporting them. The Kensho New Economies precisely and comprehensively capture the innovation and industries of the Fourth Industrial Revolution, van Moyland said.
The Kensho New Economies covers 21 subsectors, 11 sectors, and 2 tracking indices. Leveraging Kensho’s methodology, these indices may be better positioned to identify the entire ecosystem sectors propelling the Fourth Industrial Revolution. The indexing methodology includes established pure play firms as well as suppliers, innovators, and service providers for a theme; have companies included in more than one new economy industry, reflecting the reality of complex business models; and have exposure to multiple traditional GICS sectors, underscoring how the Kensho Index may provide deeper reach into the entire ecosystem of a particular theme.
Specifically, the SPDR Kensho Intelligent Structures ETF (NYSEArca: XKII), SPDR Kensho Smart Mobility ETF (NYSEArca: XKST) and SPDR Kensho Future Security ETF (NYSEArca: XKFS) may help investors focus on the potential growth opportunity in next-generation technologies.
The Kensho Intelligent Structures ETF follows companies whose products and services are driving innovation behind intelligent infrastructure, such as smart building infrastructure, smart power grids, intelligent transportation infrastructure, and intelligent water infrastructure.
The Kensho Smart Mobility ETF includes companies whose products and services are engaged in smart transportation, which includes the areas of autonomous and connected vehicle technology, drones and drone technologies used for commercial and civilian applications, and advanced transportation tracking and transport optimization systems.
Lastly, the Kensho Future Security ETF tracks companies involved with innovation behind future security, which includes the areas of cyber security and advanced border security, along with military applications like robotics, drones and drone technologies, space technology, wearable technologies and virtual or augmented reality activities.
“The SPDR Kensho ETFs seek to provide exposure to trends emerging within the Fourth Industrial Revolution, potentially enhancing a portfolio’s growth prospects while amplifying current sector allocations,” Bartolini said.
Financial advisors who are interested in learning more about potential growth opportunities can watch the webcast here on demand.