Goldman Sachs offers new ETFs in emerging tech sectors
Goldman Sachs launched a handful of new index funds aimed at gaining exposure to emerging technology fields like human genome research and robotic surgery.
“Technology is impacting every aspect of our daily lives,” says Mike Crinieri, head of ETF strategy at Goldman Sachs. “It has grown from a single sector to a key driver of every sector.”
The New York-based bank started trading five new ETFs including more than 570 equities in finance, data and manufacturing companies, according to Hardeep Walia, CEO of Motif, the automated investing platform. Motif created the indices the funds track.
Using proprietary data and research, Motif parsed out tech firms working on cutting-edge technologies. For example, robotics in manufacturing used to be an appealing theme for investors, Walia says. Now, investing in similar robotic technology used in the medical field is an emerging trend.
To construct an index, Motif employs rules-based methodology to calculate a company’s “thematic beta” — or its security's tendency to respond to market swings. Proprietary technology is used to select and weigh securities in the index, based on their relevance and investability, according to the release.
The Motif ETFs charge $5 for every $1,000 invested, according to the release, a competitive price for similar thematic investment products. Thematic funds charge as much as $9.50 and average $6.10, according to Bloomberg. Traditional ETFs charge an average $4.80 for every $1,000 invested.
Theme-based ETFs have been largely resistant to the fee compression plaguing most of asset management. Thematic funds are seen as a value add by investors considering the additional data and research that goes into them, Walia suggests.
Goldman is not the only money manager trying to tap up-and-coming tech industries. State Street has six funds focused on new economies, while Ark Investment Management has outperformed stock ETFs for the last three years with two innovation-oriented funds, according to Bloomberg.
While Motif started as a robo advisor, the firm has shifted its strategy to offer data and proprietary indices — like the ones used by the new Goldman funds. The San Mateo, California-based firm also has six patents regarding technology that allows clients to trade fractions in real time, Walia says.
“What we didn't realize when we conceptualized Motif is that we really invented two things,” he says. “We invented a trading platform and we invented a investment product. I love the retail business. But, a lot of clients started being interested in different things.”
Goldman invested $25 million in Motif in Series C funding in 2013, according to Crunchbase. Motif has raised $132 million to date, Walia says.
“The invention for us was the use of data,” Walia says. While Motif clients accessed the technology on its platform, the partnership with Goldman has “decoupled” the tech and allowed for a broader base of U.S. consumers to get onboard. Motif clients will also gain exposure to global markets. “You can’t invest in new-age consumers without access to China,” Walia says. “You can’t do manufacturing without access to Japan.” In addition to Goldman Sachs, Motif also works with U.S. Bank. The firm was in talks with Goldman for over a year.
“Data is the new alpha,” Walia says. “People think that California is the golden-nugget state. We’re really the data state.”