Behind the Ticker: Capturing Innovation Long

While investors often get swept up in the hottest themes driving innovation and chasing the big trends of today, Nomura Asset Management takes a long-term approach to innovation investing. Anthony Caruso, CFA, Head of Product Strategy & ETFs at Nomura Asset Management International sat down with Brad Roth on the latest episode of Behind the Ticker to talk the thesis underpinning the Nomura Transformational Technologies ETF (FRWD). The fund launched early this year and has already gathered over $275 million in AUM. Anthony Caruso has seen the ETF industry from just about every angle, from JP Morgan's early build-out, Dimensional's conversion playbook, to Macquarie's public business (now absorbed into Nomura after last December's acquisition). Caruso landed at Nomura Asset Management, a firm with a hundred years of history in both Japan and the U.S., that recently expanded into ETFs and roughly a billion dollars in US assets across nine funds so far. The flagship of that lineup is FRWD, the Nomura Transformational Technologies ETF, which actually predates its own ticker. The strategy started life in 2018 as a separately managed account before converting to an ETF this past January. The strategy leans on a dual approach, first mapping out which big secular themes have real economic staying power, then drilling into the actual companies riding those waves. It narrows down a small starting universe of 60-75 stocks to a concentrated, high-conviction portfolio of around 25 names. That concentration is the whole point, not a side effect. The top ten holdings make up roughly 57% of the fund, eschewing diversification and its dilution effect in favor of a more laser-focused approach that's generated some notable performance. Since 2018, the strategy has outperformed the Nasdaq-100 by about 200%, according to Caruso, and the team's underlying thesis is that markets consistently lowball how big, how broad, and how long innovation cycles actually run. While AI is the current example, space exploration and quantum computing are some of the next frontiers already on the radar. Caruso also pushes back hard on the idea that thematic investing should just be a tactical satellite position, instead, framing FRWD as a core growth holding (10-20% of an equity allocation), comparing satellite-only thematic bets to using Babe Ruth as a pinch hitter instead of building your lineup around him. With low turnover, a 65 basis point fee, and volatility treated as a source of opportunity rather than a threat, the fund has grown to about $260 million in just six months.