The most famous version of the story of the gold rush is about people taking on impossible odds in hope of becoming incredibly rich. But there might be a different story: one where smart people do very well thanks to good choices.
Michael Venuto and David Dziekanski of Toroso Asset Management both used the language of gold in recent interviews with Business Insider, and it’s not because they’re predicting fabulous wealth for investors in their funds. It’s because even a new, wide-open area is going to become a business model for someone.
And out of those business models, that infrastructure, come opportunities to deliver big returns to investors without the wild risks that can result in ruin.
Dziekanski is the manager of the year-old SoFi Gig Economy ETF, which has returned 45.5% in 2020 with an all-encompassing approach to the new ways people work. It has positions in companies that make money from freelance work providers like Uber and Lyft, but he says it also digs deeper.
“Almost half the portfolio is dedicated to kind of the ecosystem that allows the gig economy to function,” he said. “We equate that to pick and axe sales in the gold rush. If you go for gold, sometimes you make money, sometimes you don’t. But the picks and axes made money on the entire trend.”
For that reason, Dziekanski puts just as much emphasis on platforms people use to market their small businesses, the digital payments that are often used in gig work, and even online education. Individual companies and apps will succeed or fail, but vital infrastructure could be used by dozens of companies across industries.
The blockchain-focused fund
Venuto, meanwhile, manages the Amplify Transformational Data Sharing ETF, a blockchain-focused fund that’s jumped 31.6% so far this year.
Venuto doesn’t invest directly in digital currencies, but says the ETF’s performance tracks the movements of digital currencies more closely than any ETF in that space without the famous volatility those currencies can put investors through. The idea is to bring some organization and structure to investing in them.
“What we to do with the blockchain fund is be the gold miners and the gold infrastructure and the gold custodial system,” he said. “We’re buying actual public companies that are involved with mining the cryptocurrency, or transacting with the cryptocurrency, or building the infrastructure for utilizing the cryptocurrencies.”
That means he’s investing in publicly traded companies and benefiting from the rules and disclosure associated with public listing. He says that brings order to “a very Wild West kind of world.”
To make that happen, Venuto and his firm built their own blockchain-related stock index and use that to manage the fund. The largest and fastest-increasing positions today include payments company Square and Japanese internet firms Z Holdings and GMO Internet.
Square is also the top position in Dziekanski’s gig economy ETF. He explains that he’s especially bullish on digital payments companies like it and PayPal, platforms for independent contractors like Fiverr and Upwork, and e-commerce companies like Pinduduo, Alibaba, and MercadoLibre.
That’s based in part on his view that gig work will become more of a fixture of the modern economy, and a way for people to experiment with new careers and second jobs before they take them on full-time.
Many of the companies in that fund are young, and Dziekanski says he emphasizes their price-to-earnings-growth ratios and market shares to get a sense of what companies with unique business models might be worth when they take off.
“What we’re focusing on is companies that have true transformational growth over the next three to five years,” he said.