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Boutique CIO: the tech bet investors are missing out on

Boutique CIO: the tech bet investors are missing out on

Investors are missing out on numerous disruptive and innovative technology companies that are big Silicon Valley rivals, according to BlueStar’s CIO, Steven Schoenfeld.

Schoenfeld is the founder and CIO of New-York based ITEQ ETF, which created the TA-BigITech Israel Technology ETF in 2015, in order to provide investors with diversified exposure to the Israeli tech sector.

There are already plenty of index and active funds that focus on the tech sector and even more niche thematic market bets such as cybersecurity and generational plays, but Schoenfeld told Citywire Selector that many Israeli tech companies are missing from the major indexes.

‘There is a discovery story to be had with Israeli tech and it’s only just getting started. Granted it’s not going to be as big as when investors discovered emerging markets, but it will be significant.’

In just two years, the fund has climbed from $5 million to $23 million, with 71 holdings, Schoenfeld highlighted the fund’s 10.60% holding in Check Point Software, as an example of a stock which is hiding under the radar.

‘It’s a world leader in cybersecurity, it’s been doing cybersecurity since the 90s, it’s one of the oldest cybersecurity companies and yet it is still a world leader despite all of the innovation going on around us.

‘Israel is world-renowned for its start-up scene, but most of its successful start-ups are now ‘grown-ups’ as it were, and it’s hard to get comprehensive exposure to Israeli tech solely via early stage or late stage companies.’

Exclusion

Schoenfeld said because most Israeli tech stocks don’t fit the standard regional or market-cap based framework, then they are mostly excluded from popular global tech indexes and ETFs, meaning investors are either missing out or mistaking companies for US entrants.

‘Most people in Silicon Valley think Check Point is American and the fund is full of stocks like this. It’s all about the global internet of things, cybersecurity for your car, your house – it’s really a stock that ticks all the boxes, we don’t hide the fact that it’s an exciting area.’

It’s these disruptive tech themes that Schoenfeld plays heavily through the portfolio, with 15% allocated to cybersecurity and 14% allocated to the internet of things and actionable intelligence.

Schoenfeld also has 5% of the fund allocated to clean energy and agriculture technology and highlighted a Yavne-based renewable energy firm as a stock that really stands out.

‘We also like Ormat Technologies (3.37%), which is one of the world leaders in geothermal energy (heat from the earth).

‘Israel does not have any geothermal energy. It’s active in places like New Zealand, Iceland and in Chile where you would expect people to have these sorts of amenities. It’s an incredibly global company that you wouldn’t necessarily associate with Israel', he added.

Over the one year to the end of August 2017, the BlueStar TA-BigITech Israel Technology ETF returned 18.20% in US dollar terms.

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