While disruptive technology is nothing new, the rate at which this space is changing is accelerating rapidly. The COVID pandemic has turbocharged the adoption and advancement of digital technology within multiple industries.
So, an increasing number of fund managers are focusing on this megatrend of disrupting innovation. Some have made it the very foundation of their business.
“We are at the dawn of an age of disruption as innovation triggers exponential change across industries,” according to a white paper from Wellington Management. “From changing consumer behavior to the ubiquity of ‘big data’ to adapting to climate change, we believe investors need to harness the numerous long-term structural trends driving innovation.”
The paper added: “there is untapped value in underappreciated firms creating or benefiting from nonlinear change. These opportunities are crucial as we expect a structurally lower-growth environment over the long term.”
While investing in disruptive technology could potentially be very rewarding, figuring out which startups are going to grow over the ones that will flame out within six months is no easy feat. In fact, this type of speculative investing can be incredibly risky — especially if you’re going at it alone.
Investors seeking innovative disruptors that will provide value to their portfolios would do well to employ an active manager that takes a disciplined approach to the space. The Neuberger Berman Disrupters ETF (NYSE Arca: NBDS) seeks to invest in companies pursuing disruptive growth agendas that the team believes will shape the future and can invest globally across market capitalizations.
Rather than use traditional sector classification, the fund’s managers employ a disciplined process to seek innovative companies consistent with a longer-term investment horizon. The portfolio team uses machine learning, language processing, and cloud computing techniques to construct a targeted portfolio of roughly 30 companies.
NBDS is one of three actively managed ETFs that Neuberger Berman launched in April. The ETFs are an extension of the firm’s thematic equity investment capabilities using traditional fundamental equity research along with alternative data capabilities and consideration of material environmental, social, and governance factors.
Joseph Amato, chief investment officer and president of Neuberger Berman, said in a news release that the new ETFs “deliver Neuberger Berman’s thematic equity expertise to a broad investor base.”
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