Pandemic sped up adoption by five years but there’s much more on the horizon, he adds
If you think the pace of technological change increased during the pandemic, hold on to your hat. Raj Lala, President and CEO of Evolve ETFs, believes COVID-19 only accelerated the acceleration and there’s more to come.
“It changed a lot when we got vaulted into this whole work-from-home environment,” he said in a phone interview after leading a webinar on the changes impacting Evolve’s disruptive technology funds of cloud-computing, cybersecurity, and e-gaming this week.
“The funds became very topical, very relevant, and also in demand because everybody needed proper cloud-based technology and proper cyber-security, not just around the corporate servers, but also individuals at home.
“You started to see a lot more spending in a lot of different disruptive technology areas, and I think what ended up happening, ultimately, is that COVID resulted in a complete acceleration of adoption of a lot of the technologies.
“I would argue that, from an adoption perspective, we probably fast-forwarded the time it would normally have taken for us to adopt more cybersecurity and cloud technology by at least five years. So, a lot of our funds were beneficiaries and we’ve tripled our assets under management in the last 14 to 15 months since COVID.”
As the global economy begins to reopen, Lala believes many recent shifts, such as some people continuing to work from home, will be permanent, but they’ve also built the base for others. Banks, for instance, which weren’t moving to the cloud as quickly as others because of their legacy technology have now adopted cloud-based technology, such as DocuSign, and won’t return to former practices.
As the current massive cyber-attacks increase, everyone is also becoming more conscious of protecting their most precious resource – data. Even the new U.S. president, Joe Biden, is making cybersecurity one of his top priorities so the infrastructure is in place for data protection against increasing cyber-crime.
Some companies, such as Peloton, which benefitted from the pandemic as people ordered gym equipment for home after their gyms closed, probably won’t retain their growth as facilities, such as gyms, reopen.
Evolve’s e-gaming fund, meanwhile, which grew more than 30% in 2020, was seen, by some, as vulnerable to post-pandemic retraction. Lala argues that it won’t because, even while people return to work and don’t have as much time to game at home, they still have their smartphones, which provides those publishers with a bigger market. He notes there are only 200 million consoles in the world, but more than 4 billion smartphones – with the potential growth of another 3.5 billion – so publishers will continue to grow their market.
With the advent of 5G, which will allow faster uploads and downloads and richer graphics, and e-gaming’s marriage with social media, it’s not only becoming more available, social, and portable, but also poised for more growth.
As with many sectors, e-gaming’s growth will also increase the cloud-computing. Lala says it only contains 40% of the world’s data, but is expected to grow to about 50% in the next few years as more companies that migrated from their legacy technology during the pandemic continue to migrate more data to the more efficient cloud-based technology.
All of this is good news for a company like Evolve ETFs, which is seeing more advisors interested in adding disruptive technologies to their clients’ portfolios in order to improve their returns.
“This year, I’ve had more conversations with advisors about disruptive innovation within portfolios than I have in the previous four years combined,” said Lala, noting that many advisors are looking for the next big disruptor to invest in. That’s led Evolve to develop an eight-themed fund, called Evolve Innovation Fund (TSX: EDGE), for investors to offer clients, who might be interested in this before more narrowly focusing on one disruptive technology.
Lala is also riding the acceleration wave. Evolve has just launched a Big Tech ETF with six of the biggest tech companies in the world because advisors have encouraged it to get into that market, so they can deal with a Canadian fund rather than American companies, with all of the complexities that can go with buying into foreign properties.
“That's a great example of listening to your clients, talking to your clients, and having a forum to do that,” said Lala, “and getting their feedback and advice as to what gaps exist in their business and what products they're looking for that they're not seeing in the marketplace.”
As he marries the listening arts with the scientific data, Lala is already seeing the post-pandemic acceleration in another field: its electrical vehicle fund.
“We just launched the world’s first automotive innovation ETF in September 2017 and, in the first three years, we got that fund from zero to $10 million,” he said, noting that more people have started entertaining the idea as they try to reduce global pollution from combustible engines, which contribute close to 20% of carbon emissions.
As the technology improves and battery costs decrease, electrical vehicles are becoming viable for more than the wealthy and the idea’s time is coming. Evolve’s fund has grown tenfold in the past six months, and now manages almost $120 million. So, even though COVID didn’t cause the growing interest, it hasn’t hampered the acceleration, and it’s one more faster tack that they will soon be experiencing as they upgrade their vehicles.