Five new exchange-traded funds are trying to redefine the future of investing.
A new partnership between Goldman Sachs and Motif, a company using technology and data science to build what it calls “thematic” ETFs, has produced five investing products focusing on narratives that are becoming increasingly pervasive in the stock market.
The five are:
- The Goldman Sachs Motif Data-Driven World ETF, which is focused on artificial intelligence, big data, cybersecurity and data infrastructure. Top holdings include Intel, Alphabet and Microsoft.
- The Goldman Sachs Motif Finance Reimagined ETF, which is tied to the digitization of finance, blockchain and the evolution of asset management. Top holdings include Mastercard, Visa and PayPal.
- The Goldman Sachs Motif Human Evolution ETF, which features stocks relevant to precision medicine, robotic surgery, genomics and life extension. Top holdings include Intuitive Surgical, Medtronic and AstraZeneca.
- The Goldman Sachs Motif Manufacturing Revolution ETF, which banks on autonomous vehicles, 3D printing, and factory automation. Top holdings include Dassault Systems, Rockwell Automation and ABB.
- And the Goldman Sachs Motif New Age Consumer ETF, which tracks consumer discretionary and communications services stocks in fast-growing areas like e-commerce, online gaming and social media. Top holdings include Amazon, Facebook and Alibaba.
“Tech is no longer a sector. It is the driver of growth across all industries,” Hardeep Walia, founder and CEO of Motif, told CNBC’s “ETF Edge” on Monday. “What we’ve tried to do with this set of ETFs is to be very scientific, and we’ve weighted these companies in the index by their thematic exposure to these ideas.”
Each of the ETFs, which began trading Thursday, includes 120 companies. Motif covers 11 global markets with these products, which are weighted “thematically” based on their exposure to each theme, Walia said.
“All we’re doing is, frankly, what humans do, [but] we’re doing it at scale,” he said. “Think of companies that are doing interesting things: filing patents, writing interesting academic work. We bring that all together and then we write code to automate how these views get expressed.”
And while most investors will likely be familiar with the top holdings in these ETFs, they also include riskier small-cap names like genetic sequencing company Illumina in the Human Evolution ETF’s case, Walia said.
Walia, whose father is a surgeon, described competing market-cap-weighted ETFs to “asking him to do surgery with a machete.” Motif’s approach, on the other hand, is more like using a scalpel, he told CNBC.
“[Market-cap-weighted ETFs] don’t do what they’re supposed to do, and you have days like today where you get out- and underperformance just by the swings of having a huge market-cap bias,” he said. “So what we’re trying to do is look for long-term ideas that have structural tailwinds behind them. […] And one of the nice things about our model is we can be very prescriptive and demonstrate a company’s exposure to a given theme a lot more than an equal-cap or a market-cap weighting can do.”