Why would you describe this fund as a 'one to watch' and how could the strategy work in investors' portfolios?
Over the last two decades, tech innovation has been dominated by mega-cap technology companies and largely concentrated in the U.S. However, tech innovation is now broadening to smaller-cap companies and other countries, including emerging markets, due to two key drivers. First, technology adoption is rapidly accelerating in EM. Over the last five years, EM smartphone penetration has surpassed 90%, giving EM consumers access to fast, ubiquitous internet for the first time in history and giving rise to a new ecosystem of local ‘tech titans'. Second, growth of the public cloud has fueled significant innovation within software, including Software-as-a-Service ("SaaS"), causing the cost of starting a business to dramatically decline and enabling smaller companies with innovative technologies to compete with incumbents. Going forward, we believe the most exciting investment opportunities exist within this next generation of innovators - which we call "future tech leaders" - and believe that, by identifying the winners amongst them, we can deliver compelling long-term investment returns for our clients. The GS Global Future Technology Leaders Equity Portfolio seeks to invest in the most exciting technology opportunities globally with a bias towards smaller-cap companies (excluding companies with market caps >$100bn), making it highly complementary to most investors' existing tech allocations.
How have you been trying to weather the storm caused by the Covid-19 pandemic and what could be the longer-term implications for your strategy?
The GS Global Future Technology Leaders Equity Portfolio delivers differentiated exposure to technological innovation as it is truly global in nature (with ~50% of the portfolio invested outside the U.S., including 20-30% in emerging markets) and reaches further down the market cap spectrum (with >60% of the portfolio invested in companies of <$50bn in market cap). We believe most investors are significantly exposed to mega-cap tech names since they're now such a large part of all market cap-weighted benchmarks, so in this fund we exclusively invest in companies with market caps of <$100bn at the time of purchase.
We have a large, experienced, tech-dedicated team of 17 investment professionals averaging 18 years of experience, who conduct deep fundamental research to identify exciting investment opportunities with many based locally in the countries we invest in. Our investment process is comprised of deep due diligence, in-depth valuation work, and an extensive program of meetings with company management teams to procure what we believe are the most compelling investment ideas for the portfolio. Our investment philosophy is to invest in high quality businesses trading at attractive valuations. We have a strong valuation discipline, particularly compared to many tech investors, and believe this serves our clients well over the long-term. As the business models of the companies we invest in are inherently less mature than their mega-cap counterparts, there will undoubtedly be periods of heightened volatility. Taking advantage of these opportunities is important in any investment strategy, but is particularly important for this one.
Can you identify a couple of key investment opportunities for your fund you are playing at the moment in the portfolio? This could be at a stock, sector or thematic level.
We are incredibly excited by the innovation and opportunities present in the technology space today. While the pandemic accelerated the adoption rates for many tech-enabled innovations, we believe many of these key secular-growth trends are still in very early stages with long runways for growth ahead. Some of the areas we are most excited about include:
- Cloud-Enabled Software: While software spending remained healthy in 2020, we believe it will continue to accelerate as corporations continue to digitize their workplace to drive more productivity and efficiency gains.
- Digital Payments: Despite being cyclically depressed in 2020, digital payment players are acquiring new subscribers at 2.5x their pre-pandemic rate, leading us to expect a big acceleration post-crisis.
- Online Entertainment: We believe the acceleration in the adoption of online entertainment due to lockdowns and social distancing will continue after things normalize. We currently see many opportunities in ‘content delivery network' companies, which provide the enabling technology for streaming games and movies.
- Smart Components: While automotive semiconductors were the most cyclically depressed end market in 2020, we believe their rebound in 2021 could be pronounced. Additionally, we believe 5G will continue to be a strong tailwind for the industry as spending broadens out globally.
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Source: GSAM. As of 31-March-2021.
Disclosures
THIS MATERIAL DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY JURISDICTION WHERE OR TO ANY PERSON TO WHOM IT WOULD BE UNAUTHORIZED OR UNLAWFUL TO DO SO.
Prospective investors should inform themselves as to any applicable legal requirements and taxation and exchange control regulations in the countries of their citizenship, residence or domicile which might be relevant. Capital is at risk.
This material is provided at your request for informational purposes only. It is not an offer or solicitation to buy or sell any securities. The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk.
The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk.
There is no guarantee that objectives will be met.
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This material has been prepared by GSAM and is not financial research nor a product of Goldman Sachs Global Investment Research. It was not prepared in compliance with applicable provisions of law designed to promote the independence of financial analysis and is not subject to a prohibition on trading following the distribution of financial research. The views and opinions expressed may differ from the views and opinions expressed by Goldman Sachs Global Investment Research or other departments or divisions of Goldman Sachs and its affiliates. Investors are urged to consult with their financial advisors before buying or selling any securities. This information should not be relied upon in making an investment decision. GSAM has no obligation to provide any updates or changes.
Portfolio holdings and/or allocations shown above are as of the date indicated and may not be representative of future investments. The holdings and/or allocations shown may not represent all of the portfolio's investments. Future investments may or may not be profitable.
Past performance does not guarantee future results, which may vary. The value of investments and the income derived from investments will fluctuate and can go down as well as up. A loss of principal may occur.
Views and opinions expressed are for informational purposes only and do not constitute a recommendation by GSAM to buy, sell, or hold any security. Views and opinions are current as of the date of this presentation and may be subject to change, they should not be construed as investment advice.
Emerging markets securities may be less liquid and more volatile and are subject to a number of additional risks, including but not limited to currency fluctuations and political instability. Foreign securities may be more volatile than investments in U.S. securities and will be subject to a number of additional risks, including but not limited to currency fluctuations and political developments.
Although certain information has been obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness or fairness. We have relied upon and assumed without independent verification, the accuracy and completeness of all information available from public sources.
Foreign securities may be more volatile than investments in U.S. securities and will be subject to a number of additional risks, including but not limited to currency fluctuations and political developments.
Index Benchmarks
Indices are unmanaged. The figures for the index reflect the reinvestment of all income or dividends, as applicable, but do not reflect the deduction of any fees or expenses which would reduce returns. Investors cannot invest directly in indices.
The indices referenced herein have been selected because they are well known, easily recognized by investors, and reflect those indices that the Investment Manager believes, in part based on industry practice, provide a suitable benchmark against which to evaluate the investment or broader market described herein. The exclusion of "failed" or closed hedge funds may mean that each index overstates the performance of hedge funds generally.
References to indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only and do not imply that the portfolio will achieve similar results. The index composition may not reflect the manner in which a portfolio is constructed. While an adviser seeks to design a portfolio which reflects appropriate risk and return features, portfolio characteristics may deviate from those of the benchmark.
Economic and market forecasts presented herein reflect a series of assumptions and judgments as of the date of this presentation and are subject to change without notice. These forecasts do not take into account the specific investment objectives, restrictions, tax and financial situation or other needs of any specific client. Actual data will vary and may not be reflected here. These forecasts are subject to high levels of uncertainty that may affect actual performance. Accordingly, these forecasts should be viewed as merely representative of a broad range of possible outcomes. These forecasts are estimated, based on assumptions, and are subject to significant revision and may change materially as economic and market conditions change. Goldman Sachs has no obligation to provide updates or changes to these forecasts. Case studies and examples are for illustrative purposes only.
This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice. This material has been prepared by GSAM and is not financial research nor a product of Goldman Sachs Global Investment Research (GIR). It was not prepared in compliance with applicable provisions of law designed to promote the independence of financial analysis and is not subject to a prohibition on trading following the distribution of financial research. The views and opinions expressed may differ from those of Goldman Sachs Global Investment Research or other departments or divisions of Goldman Sachs and its affiliates. Investors are urged to consult with their financial advisors before buying or selling any securities. This information may not be current and GSAM has no obligation to provide any updates or changes.
Valuation levels for the assets listed in the Account statements and other documents containing prices reflect GSAM's good faith effort to ascertain fair market levels (including accrued income, if any) for all positions. The valuation information is believed by GSAM to be reliable for round lot sizes. The prices are indicative only of the assumed fair value of the positions on the relevant date. These valuation levels may not be realized by the Account upon liquidation. Market conditions and transaction size will affect liquidity and price received upon liquidation. Current exchange rates will be applied in valuing positions in foreign currency.
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Offering Documents
This material is provided at your request for informational purposes only and does not constitute a solicitation in any jurisdiction in which such a solicitation is unlawful or to any person to whom it is unlawful. It only contains selected information with regards to the fund and does not constitute an offer to buy shares in the fund. Prior to an investment, prospective investors should carefully read the latest Key Investor Information Document (KIID) as well as the offering documentation, including but not limited to the fund's prospectus which contains inter alia a comprehensive disclosure of applicable risks. The relevant articles of association, prospectus, supplement, KIID and latest annual/semi-annual report are available free of charge from the fund's paying and information agent and/or from your financial adviser.
Distribution of Shares
Shares of the fund may not be registered for public distribution in a number of jurisdictions (including but not limited to any Latin American, African or Asian countries). Therefore, the shares of the fund must not be marketed or offered in or to residents of any such jurisdictions unless such marketing or offering is made in compliance with applicable exemptions for the private placement of collective investment schemes and other applicable jurisdictional rules and regulations.
Investment Advice and Potential Loss
Financial advisers generally suggest a diversified portfolio of investments. The fund described herein does not represent a diversified investment by itself. This material must not be construed as investment or tax advice. Prospective investors should consult their financial and tax adviser before investing in order to determine whether an investment would be suitable for them.
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Swing Pricing
Please note that the fund operates a swing pricing policy. Investors should be aware that from time to time this may result in the fund performing differently compared to the reference benchmark based solely on the effect of swing pricing rather than price developments of underlying instruments.
Confidentiality
