Goldman Sachs Group is offering investors new ways to seek equity gains from disruptive companies, with its asset management business launching three exchange-traded funds focused on secular growth trends.
The Goldman Sachs Future Consumer Equity ETF
the Goldman Sachs Future Health Care Equity ETF
and the Goldman Sachs Future Real Estate and Infrastructure Equity ETF
are actively managed and will trade on the New York Stock Exchange, according to a statement from the bank’s asset management group.
Tilting into “themes of innovation and disruption” may help investors find bigger returns over the next decade, as the traditional portfolio comprising 60% stocks and 40% bonds is “very broken” and expected to produce smaller gains compared to the past 10 years, said Katie Koch, co-head of the fundamental equity business at Goldman Sachs Asset Management, during a media briefing on the new ETFs.
The funds seek to invest in companies that are the “future winners,” she said, contrasting the actively managed ETF strategies with the “backward-looking” S&P 500 benchmark. The index is “concentrated,” she said, with heavy exposure to a small group of large companies in Big Tech.
The Goldman Sachs Future Real Estate and Infrastructure Equity ETF should benefit from rising inflation and increased fiscal spending expected under the U.S. infrastructure bill, said Kristin Kuney, a portfolio manager for the fund, during the briefing. The fund sees compelling investment opportunities in mega-themes such as environmental sustainability and demographic shifts.
Some real estate and infrastructure investment opportunities may tie into younger people’s desire for “experiences over things,” said Koch, with the pandemic creating “pent up demand” for real life experiences such as concerts and travel.
Hotels and camping are among the areas within travel and leisure being considered by the Goldman Sachs Future Real Estate and Infrastructure Equity ETF, said Kuney. Many people have been renting or buying recreational vehicles to drive to the coast and other “desirable” places, she said, with both Millennials and “the aging population” seeking destination vacations.
Millennials, and increasingly Generation Z, are “the world’s most powerful and disruptive consumers ever,” said Marissa Ansell, a client portfolio manager on Goldman’s fundamental equity team, during the briefing. When selecting stocks across sectors globally, the Goldman Sachs Future Consumer Equity ETF will focus on “tech-enabled consumption” as well as the lifestyle preferences and values of younger consumers, she said.
They tend to care more about health and wellness and are interested in sustainability and environmental issues, according to Ansell.
The global push for green energy is growing while the pandemic continues to disrupt people’s working and spending habits.
The Goldman Sachs Future Real Estate and Infrastructure Equity ETF will seek to avoid assets that are “getting disrupted,” Abhinav Zutshi, who is also a portfolio manager for the fund, said during the briefing. That could include some “carbon-heavy” energy infrastructure, retail real estate and “traditional” offices, he said.
While fears over the spread of COVID-19 sparked a shift to remote work, some jobs in life science can’t be done from home, according to Kuney. The kind of research and innovation that led to the COVID vaccine will probably fuel demand for life-science space for many years, she said, citing Alexandria Real Estate Equities
as poised to benefit from that trend.
As for the Goldman Sachs Future Health Care Equity ETF, the new fund will invest in companies developing new treatments or technologies in areas such as genomics and tech-enabled procedures. The pandemic has accelerated innovation in health care, spurring “unprecedented funding” into the sector, said Jenny Chang, a portfolio manager for the ETF, during the briefing.
The three new ETFs follow the September launch of another ETF that Goldman designed to profit from disruptive innovation. That fund, the Goldman Sachs Future Tech Leaders Equity ETF
invests in listed companies with a market value of less than $100 billion, steering away from U.S. megacap tech stocks.