Goldman Sachs Launches 3 New Thematic ETFs

Goldman Sachs Asset Management has launched three new actively managed, fully transparent equity ETFs that focus on trends it believes will be key for future global growth: consumption by millennials, innovations in health care, and sustainability in real estate and infrastructure.

The three ETFs are the Goldman Sachs Future Consumer Equity ETF (GBUY), the Goldman Sachs Future Health Care Equity ETF (GDOC) and the Goldman Sachs Future Real Estate and Infrastructure Equity ETF (GREI). All three are relatively concentrated equity funds, and charge a 0.75% fee. The ETFs provide U.S. investors accessibility to investment themes that have been available to the firm’s overseas clients for several years.

“It’s important for investors to position themselves on the right side of innovation and disruption … investing toward the future and not the past,” said Katie Koch, co-head of the fundamental equity business within Goldman Sachs Asset Management, in a roundtable with reporters. Aligning portfolios with trends in innovation and disruption can provide investors with the potential for “enormous wealth creation,” she added.

In contrast, sticking with the traditional 60/40 stock/bond portfolio and the S&P 500, a “backward-looking” market cap-weighted benchmark that is heavily concentrated in 1% of its stocks, will fail to deliver the returns investors need to achieve their long-term savings goals, Koch said. The 60/40 portfolio, which has returned almost 10% on average over the last 10 years will likely return just 4%-5% over the next 10, she said.

Here’s a rundown of the three new ETFs:

GBUY invests in companies across any sector that are aligned with the priorities and spending habits of younger consumers, including their increased adoption of technology and different lifestyle preferences and values.

Marissa Ansell, a client portfolio manager on the fundamental equity team at Goldman Sachs Asset Management, noted in the roundtable there are nearly 5 billion people worldwide under age 40, including millennials and increasingly Generation Z, who constitute “the world’s most powerful consumer force” with collective incomes greater than all other generations combined.

GDOC can invest in all innovative areas within health care and focuses on companies involved in genomics, precision medicine, technology-enabled procedures and digital health care. The fund offers more diversity than biotech funds and is underweight large-cap pharmaceuticals.

Portfolio manager Jenny Chung noted that many health care innovations are still in their early stages, offering investors a potentially strong growth runway. For example, there are 5,000 diseases in the world but currently cures for only 5% of them, Chung said.

GREI invests in real estate and infrastructure companies that are aligned with trends in innovation, demographic shifts and environmental and social sustainability. Both sectors offer attractive yields, relatively predictable growth, lower volatility than broad equities and low correlations with other asset classes.

GREI’s theme has some commonalities with GBUY and GDOC. Millennials take five trips annually (which involve hotels and transportation), 30% more than the previous generation, and an aging population creates the need for more senior housing and health care infrastructure, said portfolio manager Abhinav Zutshi.

All three ETFs are part of the thematic strategy of Goldman Sachs’ fundamental equity business, which launched its first thematic strategy six years ago and now has over $22 billion in assets under management. They join two other thematic ETFs launched earlier this year for U.S. investors: the Goldman Sachs Future Tech Leaders Equity ETF (GTEK) and the Goldman Sachs Future Planet Equity ETF (GSFP). Goldman Sachs Asset Management manages $27.5 billion in ETF assets globally.