More than any other sector, technology is constantly evolving. Exchange traded funds (ETFs) should reflect that evolution. To some extent, ETFs increasingly reflect the evolutionary nature of the technology sector.
Gone are the days when investors’ primary choices among technology index funds were cap-weighted products dominated by large- and mega-cap, mature tech companies such as Apple Inc. (AAPL) and Microsoft Corp. (MSFT). Today, investors can consider ETFs that isolate specific tech themes, such as artificial intelligence, cloud computing and robotics.
This is the rub: picking which revolutionary tech concepts and themes will be in favor at any given moment is almost as tricky as picking individual securities. The ALPS Disruptive Technologies ETF (DTEC) ameliorates the burden of trying to isolate specific disruptive and exponential technology themes.
An Evolving Concept For An Evolving Sector
Rather than isolate a single, fast-growing segment of the technology universe, such as cybersecurity, cloud computing or 3D printing, the ALPS Disruptive Technologies ETF provides investors with equal-weight exposure to 10 booming corners of the market.
Those disruptive tech themes are as follows: healthcare innovation, Internet of things, clean grid and smart energy; cloud computing, big data and analytics, fintech artificial intelligence and robotics, cybersecurity, mobile payments and 3D printing.
Let’s look at some of these new tech growth frontiers on individual basis, starting with cloud computing, which posted another year of exponential growth in 2017.
“The worldwide public cloud services market revenue is projected to grow 18.5 percent in 2017 to total $260.2 billion, up from $219.6 billion in 2016,” according to Gartner, Inc. “The highest revenue growth will come from cloud system infrastructure services (infrastructure as a service [IaaS]), which is projected to grow 36.6 percent in 2017 to reach $34.7 billion.”
The research firm expects Cloud Application Infrastructure Services (PaaS) revenue to jump to nearly $21 billion in 2020, more than double the level seen in 2016 while forecasting Cloud System Infrastructure Services (IaaS) revenue to more than double by 2020 from the levels seen last year.
3D Printing: Printing Up Growth
3D printing is another disruptive technology DTEC features exposure to, a positive trait when considering the widespread applications and demand for 3D printers and related services. Among the industries expected to drive 3D printing growth in the years ahead are aerospace and defense, automotive and healthcare. By 2020, healthcare is expected to be the second-largest driver of 3D printing revenue behind discrete manufacturing.
“The global 3D printing powder market, which valued at US$313.7 mn in 2016, is estimated to rise to a revenue opportunity of US$1,558.9 mn by 2025, registering an impressive CAGR of 20.3% between 2017 and 2025,” according to Transparency Market Research.
Magnificent Mobile Payments
Easily one of DTEC’s most pivotal growth frontiers is mobile payments. Did you know that nearly a third of all transactions at Starbucks are mobile payments? That is just one anecdote, but it underscores the massive growth currently happening in the mobile payments markets. Mobile payments totaled $450 billion in 2015, but that figure is expected to approach $1.1 trillion in 2019.
Importantly, the mobile payments investment theme is truly international in scope. For example, cash is all but dead in China, where on the mainland, mobile payments is already a $5 trillion market.
In the mobile point of sale (PoS) segment, “transaction Value is expected to show an annual growth rate (CAGR 2018-2022) of 35.7 % resulting in the total amount of US$1,328,244m in 2022,” according to Statista. “The number of users is expected to amount to 977.2m by 2022.”
An investor should consider the investment objectives, risks, charges and expenses carefully before investing. To obtain a prospectus which contain this and other information call 866.675.2639 or visit www.alpsfunds.com. Read the prospectus carefully before investing.
An investment in the ALPS Disruptive Technologies ETF (DTEC) may be subject to substantially greater risk and volatility than investments in larger and more mature technology companies.
There is no assurance that the market developments and sector growth based upon the themes discussed in the article will come to pass.
ALPS Disruptive Technologies ETF shares are not individually redeemable. Investors buy and sell shares of the ALPS Disruptive Technologies ETF on a secondary market. Only market makers or “authorized participants” may trade directly with the Fund, typically in blocks of 50,000 shares.
ALPS Advisors, Inc. (AAI) has engaged IRIS Werks, LLC (IRIS) to produce analysis and commentary on ALPS-advised ETFs. IRIS currently has a compensated business relationship with AAI. AAI is not affiliated with IRIS.
The content and opinions expressed in this article are that of the author and not the views and opinions of AAI. In addition, AAI assumes no responsibility to ensure the accuracy of the content written by the author.
There are risks involved with investing in ETFs including the loss of money. Additional information regarding the risks of this investment is available in the prospectus. Past Performance is not indicative of future results.
The fund is new and has limited operating history.
ALPS Portfolio Solutions Distributor, Inc. is the distributor for the ALPS Disruptive Technologies ETF. AAI is affiliated with ALPS Portfolio Solutions Distributor, Inc.
The author is not an investment professional and this article should not be considered investment advice. While the information and statistical data contained herein are based on sources believed to be reliable, the author takes no responsibility to ensure the accuracy of the content. Additionally, this article should not be relied on or be the basis for an investment decision. Information that is historical is not indicative of future results, and subject to change.
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