More investors and their financial advisors are considering the gig economy as a potential high-growth investment and an effective way to have their portfolios benefit from long-term, global labor and technology trends. The “gig economy” refers to the group of companies that embrace, support or otherwise benefit from a workforce where independent consultants, contractors, temporary, or on-call workers are empowered to create their own freelance business by leveraging recent developments in technology platforms that enable individuals to offer their services directly to retail and commercial customers. In its best form it represents the personalization of employment and empowerment of workers. For businesses, it’s about being able to tap into on-demand talent in a convenient and customized manner.
Why Invest in the Gig Economy
Declining/Changing Work Force:
Many countries around the world have been seeing declining birth rates for decades, which is reducing their labor pools and therefore forcing companies to find an alternative workforce. COVID has forced the exit of millions of people who cannot work and meet the increased demands at home at the same time.
Many of them are looking for flexible schedules and prefer remote jobs so they can manage home learning and other personal demands, not just in the short term but also longer term.
More businesses are viewing talent as networked ecosystems and are taking steps to create business talent models that integrate internal and external workers in teams, blending full-time/permanent hires with freelance, contract, or on-demand talent for flexibility, speed and workforce sustainability.
Technology Advancements:
Rapidly accelerating technological changes in processing power and connectivity have created a data revolution, which is placing unprecedented amounts of information in the hands of consumers and businesses and enabling a proliferation of technology-enabled business models like GrubHub and Lyft.
The furious pace of technological innovation is shortening the lifecycle of companies, enabling rapid introduction and adoption of gig-related tools and platforms. Equally, it is changing the economies of scale equation, allowing small companies to compete in a global marketplace.
Ultimately, many believe the growing development and acceptance of technology may disintermediate the employment model*.
About the SoFi Gig Economy ETF
GIGE is the first ETF to seek long-term capital appreciation concentrating specifically on companies involved in the revolutionary shift towards a gig economy. GIGE is very much a theme of themes by tapping into the global trends in the workforce and technology, providing access to the companies that have transformed the way people access goods, services and work. The fund is actively managed by Toroso Investments to keep on top of emerging companies and market trends and conditions. The fund is structured so most companies that IPO and fit GIGE’s criteria can be included in the portfolio after one month of trading, as opposed to traditional passive funds that typically wait 60 to 90 days to include a new IPO.
GIGE’s breadth of holdings represents the broadest definition of the gig economy to tap into its high growth potential. GIGE’s holding are approximately 40-50% outside the U.S. and include large-, mid and small-cap securities. Their investment strategy considers many household gig names, but they also use a “pick-and-shovel” strategy, meaning they research many companies that support the gig economy.
GIGE companies include four categories:
Platform Businesses:
This is likely what most people think of when they hear gig economy. This category includes: app-based platforms, web-based stores, auction sites, and other commission-based platforms such as Alibaba, eBay and Etsy.
Services and Transactions Businesses:
This includes companies that facilitate transactions and support the operations of the gig economy such as DocuSign, PayPal and Square.
Marketing Businesses:
Traditional marketing is expensive and doesn’t work in the gig economy. However, social media and messaging companies work well and therefore make up a large portion of this segment. Examples include Eventbrite, Facebook, Tencent, and Twitter.
Ancillary Businesses:
This category includes non-traditional companies, such as HealthEquity, that are not directly related to the gig economy but support and/or benefit from the gig economy.
Conclusion
The SoFi Gig Economy ETF offers a compelling investment option for investors and financial advisors to position portfolios to help benefit from global demographic changes and technology innovations. Investors are already engaging with the rapidly growing gig economy and now they can more readily invest in it.
n.b. This is sponsored content and is not FINSUM editorial