Technology is the largest sector in the S&P 500 and a beloved destination for investors seeking growth. It’s also the epicenter of evolution that impacts everyday lives.
Some exchange traded funds are better suited for that evolution than others. Enter the newly minted Goldman Sachs Future Tech Leaders Equity ETF (GTEK). The newest addition to the Goldman Sachs suite of ETFs debuted last week, arriving at a time when investors are demanding more out of tech ETFs than substantial allocations to the largest names in the sector.
Today, investors already know the stories of Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), and the like, and while long-term returns by those names are stellar, investors want to unearth the next great tech leaders. The actively managed GTEK aims to do just that.
“We believe there is a disconnect between where investors are positioned in technology companies today and where we see the best potential investment opportunities over the next decade. The Goldman Sachs Future Tech Leaders Equity ETF invests in technology companies with market capitalizations of less than $100 billion, seeking to give investors exposure to the next generation of potential tech leaders,” according to the issuer.
GTEK’s top three holdings are in Marvell Technology (NASDAQ:MRVL), weighted at 3.1%; MercadoLibre (NASDAQ:MELI), weighted at 2.9%; and HubSpot (NYSE:HUBS), weighted at 2.6%.
While those companies aren’t small per se and may be known to a broad swath of investors, GTEK is compelling at a time when a small number of mega-cap companies dominate traditional growth and tech ETFs.
“Big tech firms such as Facebook Inc., Apple Inc. and Google’s parent Alphabet Inc. have long dominated the stock market, but their influence soared to new highs during the pandemic amid widespread lockdowns and the work-from-home era. The might of the mega caps remains intact this year even as higher inflation renews concerns over their lofty valuations,” reports Katherine Greifeld for Bloomberg.
Interestingly, GTEK avoids substantial allocations to the most familiar tech stocks despite having a significantly higher allocation to the sector than old guard growth ETFs. For example, the Goldman Sachs ETF allocates 65.7% of its weight to tech stocks compared to the 41.78% allocation in the S&P 500 Growth Index.
Beyond that, GTEK is a departure from traditional tech ETFs in another way: a focus on disruptive, innovative growth names. A simpler way of looking at this is that GTEK offers investors more exposure to, say, cloud computing, fintech, and e-commerce equities than they could find in a standard, passive tech ETF.
For more news, information, and strategy, visit the Future ETFs Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.