Gabrielle Vennitti, Senior Manager of ETF Listings at Nasdaq, speaks with Brad Warden, CFA, Senior Portfolio Manager of the Nomura Transformational Technologies ETF (FRWD), about the team’s approach to innovation investing and the launch of their concentrated active ETF strategy.
- Your team launched the Nomura Transformational Technologies ETF, FRWD, on Nasdaq earlier this year. Can you talk about the team’s approach to technology investing in the current environment?
The market consistently underestimates innovation’s magnitude, breadth, and duration. That’s been true across every major technology wave—and it creates significant opportunity for disciplined, active managers. The great part about investing in these innovation waves is that each wave starts at a higher baseline, has a larger addressable market, and moves faster than the previous one. The future consistently arrives faster than expectations adjust. The hard part is that it takes considerable experience and expertise to differentiate truly transformational innovation from exciting ideas that end up being flashes in the pan.
Our job is identifying where real economic value will be created and who will win. We do that through a disciplined two-lens evaluation:
Lens 1 – Innovation Themes Analysis: We evaluate four dimensions—maturity and duration, end-market opportunity, economic profit potential, and investability. This process helps us identify where enabling technologies are reaching inflection points.
Lens 2 – Company-Specific Assessment: We examine business model durability, management quality, and valuation. Both lenses must align before a company enters the portfolio.
Current Market Positioning:
In our view, we’re at a critical point—roughly year three of an eight-to-ten-year AI wave:
- Stage 1 (Infrastructure): Still building—we’re witnessing a once-in-a-generation data center buildout
- Stage 2 (Adoption): Just beginning as enterprises integrate AI into products and productivity
- Stage 3 (Disruption): Broad impact, where new products and industries emerge
This maturity spectrum demands active positioning. Below the surface, the infrastructure layer—semiconductors, data centers, power infrastructure—has performed very differently than the adoption layer, where debates around incumbent versus disruptor positioning continue. We actively manage across these dynamics rather than anchoring to one position along the spectrum.
Looking Ahead:
We’re currently approaching the midpoint of a multi-year AI cycle. Stage 1 infrastructure is still building, Stage 2 adoption is beginning to gain momentum, and Stage 3 disruption is becoming visible. This creates a multi-year opportunity set where active management becomes essential to navigate which companies and themes lead at each stage.
The once-in-a-generation data center buildout we’re witnessing, combined with emerging adoption patterns, reinforces our conviction that innovation-focused active management will be critical for investors seeking to participate in this transformation.
- What should investors consider when allocating to active technology managers in today’s market?
History offers a compelling case for why active management matters during technological transitions.
Market Leadership Transforms Completely:
Compare the top ten names in the S&P 500 from 2007 to the top ten in 2022—only one name overlaps. That fifteen-year period included mobile computing, cloud infrastructure, and the rise of digital platforms. We believe we’re in a similar transformational period now, approaching the midpoint of the AI cycle where active management opportunity is historically greatest.
Innovation Transcends Sectors:
The most powerful innovation effects happen through operational transformation across ALL industries—not just in technology classifications. We find compelling investments across industries being transformed by automation, healthcare companies leveraging AI for drug discovery, and financial services reimagining operations. The opportunity is at the point of adoption, not invention.
Volatility Creates Opportunity:
At present, volatility has increased across technology-related names. This volatility is necessary and natural—double-digit drawdowns were common during the PC era and mobile era. This volatility creates price-fundamental dislocations that active managers can exploit while passive strategies simply ride it down and back up, missing the opportunity to reposition.
Active Edge During Inflection Points:
Passive strategies anchor investors to yesterday’s winners, becoming particularly costly during technological transitions. Active positioning across the complete maturity spectrum—from infrastructure buildout to early adoption to eventual disruption—requires the nimbleness that indexing and niche products cannot provide.
- How does FRWD fit into Nomura’s broader ETF suite?
FRWD is positioned to optimize your long-term strategic growth allocation—not serve as a tactical satellite holding.
The “Babe Ruth Pinch Hitter” Problem:
Many investors treat innovation as a satellite position, trying to time the markets around technology cycles. That’s like using Babe Ruth as a pinch hitter—wasting the highest-return potential asset. We believe the underlying forces of innovation should be a core component of long-term portfolios, not relegated to the edges.
Concentrated Conviction Structure:
FRWD typically holds 20-30 names—our highest-conviction ideas positioned across the maturity spectrum of multiple innovation waves. Generally, 60-75 stocks pass both lenses of our evaluation framework across our strategies, and FRWD represents the most compelling risk-reward opportunities within that universe.
- What are Nomura Asset Management’s plans to further grow its ETF lineup in the U.S.?
Nomura Asset Management is scaling its U.S. ETF platform thoughtfully with a focus on active management and research-driven investing. Having recently crossed $1 billion in ETF AUM, the firm is leveraging its strong global foundation across equities, fixed income, and private markets. The growth strategy emphasizes investment performance, differentiated client solutions, and long-term sustainable expansion rather than rapid asset gathering.
With recent ETF share class relief providing greater flexibility to bring products to market, we are positioned to innovate around product structures—including customized SMAs, active ETF sleeves within broader mandates, and multi-asset solutions. The approach focuses on concentrated positioning and identifying differentiated sources of return across sectors, geographies, and market caps, treating ETFs as part of a broader toolkit for delivering outcome-oriented client solutions.
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