KNGS invests in compounders: cashflow generating companies that are positioned to benefit from key megatrends. Cantwell explains, “our strategy is simple, but difficult to execute. We look for the same characteristics that made businesses like Amazon and Google successful over the past two decades.”
Robert gave us the three megatrends he is most excited about for the next decade: (1) the expanding metaverse within consumer internet, (2) the transition from systems of record to systems of action within enterprise services, and (3) the rapid rise of actively managed ETFs.
“People are overthinking the metaverse. In 1870, people worked 60 hours a week. Today, less than 40. It might be less than 20 in another 150 years. Some people spend the extra time going out, but we’ve also invented new forms of entertainment in video games and social media. Social and gaming represent a $320 billion industry today, which we expect to reach $1 trillion over the next decade. Business models that control metaverse monetization through transactions or advertising may prove very accretive for shareholders.”
"Social and gaming represent a $320 billion industry today, which we expect to reach $1 trillion over the next decade”
Within enterprise services, Robert thinks cloud computing is still really early. “You have older SaaS providers that are just databases at the end of the day. Where we see the real growth is in systems of action. This software aggregates information from anywhere in an enterprise for the purpose of directing business activities. SaaS companies today generate $170 billion in revenue, but as more transition into systems of action, it’s another industry that will eclipse $1 trillion this decade.”
Cantwell believes KNGS is itself part of a mega trend: actively managed ETFs are expected to grow from $300 billion in assets to over $3 trillion over the next decade. Cantwell believes there’s a great opportunity for managers who run differentiated strategies with high active share to take part in the expansion.
In the spirit of shining a light on hedge funds and private equity, Cantwell’s team deploys another unique element: sharing the research underpinning their investment decisions publicly on platforms like Bloomberg and Twitter. “Relationships are everything in investment management,” Cantwell said. “We’re open about what we do because we want to be accountable to our investors for our decisions. It’s not just a nice thing to say either; transparency makes our investment process better.”
Portfolio manager, Compound Kings ETF (KNGS).