Scouting rising tech stars


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As an investment manager, we are often asked what makes the Technology sector so special. Why are we such avid advocates for a collection of companies that operate in such obscure and little-known fields? Why not dedicate our capabilities to more practical endeavors like analyzing grocery stores or pipelines?

The answer is simple, we see Technology as not just a sector but an expression of human ingenuity and innovation. Technology companies are collections of some of the brightest people in the world with the most vivid imagination and strong-willed determination who have set out to disrupt a stale status quo. A follow up question that is also asked is “how do we know if they will succeed?”

The Next Chapter in Technology

To help answer these questions and shed some light on the inner thoughts of the great minds at TD Asset Management Inc. (TDAM), Vitali Mossounov, Portfolio Manager and Global Technology Analyst recently authored an article titled The Next Chapter in Technology. In the article, Vitali does an excellent job discussing how he believes conditions are ripe for technological success and how the decade of the 2020s may be a potent incubator for technological disruption.

Looking back

Up until now, we believe that the fruits of innovation have been disproportionately harvested by the Big Tech companies. Specifically, the large platform operators of Apple Inc., Alphabet Inc. (Google LLC), Amazon.com Inc. (Amazon), Meta Platforms Inc. (Facebook, Inc.), and Microsoft Corporation. Collectively, these five companies have used the conditions of sufficient buildings blocks, receptive population, inexpensive capital, and absent regulation to ride the smartphone revolution to unprecedented heights of market leadership and concentration. The 2010s belonged to the large internet platforms: they emerged from being niche companies into near literal owners of the tech universe.

We believe that the current platforms will likely remain relatively dominant forces in global innovation, business, and capital markets for years to come. However, we see three forces as potentially capping incremental growth:

  • Emerging and intensifying regulatory headwinds driving higher costs while constraining revenue opportunities
  • High penetration into their respective total addressable markets limiting revenue growth rates
  • Rising competitive forces that challenge the dominance of the Big Tech platforms

Looking forward

Over the next decade, we expect to see the continued rise of a new generation of successful large-cap tech companies. These are anticipated to come in two forms: some may be outright challengers to Big Tech’s way of doing business (e.g., Shopify Inc. vs. Amazon) while others may piggyback on what has been already built by the big platforms.

Here comes TECI

Against this backdrop, we are excited to announce the launch of our second technology ETF, the TD Global Technology Innovators Index ETF (TECI). TECI aims to build on the success of the TD Global Technology Leaders Index ETF (TEC) by providing investors exposure to, what we believe, are faster-growing, more disruptive technology companies. Instead, its top holdings consist of prominent, fast-growing disruptors still in the early to middle points of their life cycle.

We launched TEC in May 2019 which is designed for investors who want to maximize their participation in the technology trends of today and can be a perfect solution for those lacking material technology exposure or presently finding their exposure through inefficient vehicles. TECI on the other hand is targeted to investors that want to maximize their participation in the trends of today and tomorrow.

Depending on an investor's goals and needs, from a tech standpoint, TDAM has you covered. Whether it is exposure to the big players, an allocation to the growth trends of today, or a bit of both, investors can gain access to these different options through both TEC and TECI.

Visit the TD Technology ETF Landing Page for more information.

The information contained herein has been provided by TD Asset Management Inc. and is for information purposes only. The information has been drawn from sources believed to be reliable. The information does not provide financial, legal, tax or investment advice. Particular investment, tax, or trading strategies should be evaluated relative to each individual's objectives and risk tolerance.

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Index returns are shown for comparative purposes only. Indexes are unmanaged and their returns include reinvestment of dividends, if applicable, but do not include any sales charges or fees as such costs would lower performance. It is not possible to invest directly in an index.

Commissions, management fees and expenses all may be associated with investments in exchange-traded funds (ETFs). Please read the prospectus and summary document(s) before investing. ETFs are not guaranteed, their values change frequently, and past performance may not be repeated. ETF units are bought and sold at market price on a stock exchange and brokerage commissions will reduce returns.

The TD Global Technology Leaders Index ETF and the TD Global Technology Innovators Index ETF (the “Funds”) are not sponsored, promoted, sold or supported in any other manner by Solactive AG nor does Solactive AG offer any express or implicit guarantee or assurance either with regard to the results of using the Solactive Global Technology Leaders Index (CA NTA) (“Index”) and/or any trademark(s) associated with the Index or the price of the Index at any time or in any other respect. The Index is calculated and published by Solactive AG. Solactive AG uses its best efforts to ensure that the Index is calculated correctly. Irrespective of its obligations towards TDAM, Solactive AG has no obligation to point out errors in the Index to third parties including but not limited to investors and/or financial intermediaries of the Funds. Neither publication of the Index by Solactive AG nor the licensing of the Index or any trademark(s) associated with the Index for the purpose of use in connection with the Funds constitutes a recommendation by Solactive AG to invest capital in said Funds nor does it in any way represent an assurance or opinion of Solactive AG with regard to any investment in the Funds.

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