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Digital Growth Spurt

For more than a decade, the digital economy has become a known driver of U.S. economic growth thanks to innovations within software, cloud computing and e-commerce. How might long-term investors stand to benefit going forward?

For more than a decade, the digital economy has become a known driver of U.S. economic growth thanks to innovations within software, cloud computing and e-commerce. How might long-term investors stand to benefit going forward?​​
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​​​​Chart showing digital economy % of GDP growing from 2005 to 2022 Estimated​​​​​​​​​​​
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  • The digital economy consists of infrastructure (e.g., hardware and software), e-commerce, and digital services (e.g., cloud services, internet and data and telecommunications), according to the Bureau of Economic Analysis (BEA). The share of the digital economy relative to U.S. GDP has increased from 11% in 2005 to an estimated 19% in 2022, as illustrated in the chart above. During this period, the compounded annual growth rate of the digital economy was approximately 300 basis points greater than that of U.S. GDP growth.1
  • We believe the digital economy’s increasing proportion relative to the overall economy can be attributed to the high scalability of innovations like cloud computing , where digital products and services can be replicated and distributed without the need for expensive physical infrastructure​. This has enabled digital companies to reach a large total addressable market quickly and cost-effectively.
  • ​Companies that gain market share in the economy have the potential to gain share in the stock market, in our view. We believe those corporations enabling digital activity in areas such as cloud infrastructure and applications as well as e-commerce are well positioned for the continued digital evolution of the economy.
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1From 2005 through 2022, the inflation adjusted compounded annual growth rate for the digital economy and U.S. GDP was approximately 4.90% and 1.65%, respectively. Data for this calculation was taken from Alger 2022 estimates, as stated above, the BEA, and the U.S. Department of Commerce.


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The views expressed are the views of Fred Alger Management, LLC (“FAM”) and its affiliates as of March 2023. These views are subject to change at any time and may not represent the views of all portfolio management teams. These views should not be interpreted as a guarantee of the future performance of the markets, any security or any funds managed by FAM. These views are not meant to provide investment advice and should not be considered a recommendation to purchase or sell securities.

Risk Disclosures: Investing in the stock market involves risks, including the potential loss of principal. Growth stocks may be more volatile than other stocks as their prices tend to be higher in relation to their companies’ earnings and may be more sensitive to market, political, and economic developments. Local, regional or global events such as environmental or natural disasters, war, terrorism, pandemics, outbreaks of infectious diseases and similar public health threats, recessions, or other events could have a significant impact on investments. Past performance is not indicative of future performance. Investors whose reference currency differs from that in which the underlying assets are invested may be subject to exchange rate movements that alter the value of their investments. Investing in innovation is not without risk and there is no guarantee that investments in research and development will result in a company gaining market share or achieving enhanced revenue. Companies exploring new technologies may face regulatory, political or legal challenges that may adversely impact their competitive positioning and financial prospects. Also, developing technologies to displace older technologies or create new markets may not in fact do so, and there may be sector-specific risks as well. As is the case with any industry, there will be winners and losers that emerge and investors therefore need to conduct a significant amount of due diligence on individual companies to assess these risks and opportunities.

Important Information for US Investors: This material must be accompanied by the most recent fund fact sheet(s) if used in connection with the sale of mutual fund and ETF shares. Fred Alger & Company, LLC serves as distributor of the Alger mutual funds.

Important Information for UK and EU Investors: This material is directed at investment professionals and qualified investors (as defined by MiFID/FCA regulations). It is for information purposes only and has been prepared and is made available for the benefit investors. This material does not constitute an offer or solicitation to any person in any jurisdiction in which it is not authorized or permitted, or to anyone who would be an unlawful recipient, and is only intended for use by original recipients and addressees. The original recipient is solely responsible for any actions in further distributing this material and should be satisfied in doing so that there is no breach of local legislation or regulation.

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Alger Management, Ltd. (company house number 8634056, domiciled at 78 Brook Street, London W1K 5EF, UK) is authorized and regulated by the Financial Conduct Au¬thority, for the distribution of regulated financial products and services. FAM and/or Weatherbie Capital, LLC, U.S. registered investment advisors, serve as sub-portfolio manager to financial products distributed by Alger Management, Ltd.

Alger Group Holdings, LLC (parent company of FAM and Alger Management, Ltd.), FAM, and Fred Alger & Company, LLC are not authorized persons for the purposes of the Financial Services and Markets Act 2000 of the United Kingdom (“FSMA”) and this material has not been approved by an authorized person for the purposes of Section 21(2)(b) of the FSMA.

Important information for Investors in Israel: This material is provided in Israel only to investors of the type listed in the first schedule of the Securities Law, 1968 (the “Securities Law”) and the Regulation of Investment Advice, Investment Marketing and Investment Portfolio Management Law, 1995. The Fund units will not be sold to investors who are not of the type listed in the first schedule of the Securities Law.

Alger estimates for the 2022 percentage of U.S. GDP for the digital economy took the nominal 2022 growth rate for each segment (i.e., infrastructure, e-commerce, and digital services) and adjusted for inflation by utilizing data from the BEA.

Data from 2005‐2021 include real, current‐dollar, and price data for digital economy value added and gross output by activity and by industry, as well as digital economy compensation and employment by industry. The industries are defined according to the 2012 North American Industry Classification System (NAICS). These statistics were prepared by the Bureau of Economic Analysis (BEA), U.S. Department of Commerce.

The Bureau of Economic Analysis (BEA) of the United States Department of Commerce is a U.S. government agency that provides official macroeconomic and industry statistics, most notably reports about the gross domestic product (GDP) of the United States and its various units—states, cities/towns/townships/villages/counties, and metropolitan areas.

Alger pays compensation to third party marketers to sell various strategies to prospective investors.

Fre​d Alger & Company, LLC 100 Pearl Street, New York, NY 10004 / www.alger.com​​ ​/ 800.305.8547 (Retail) / 800.223.3810 (Institutional)​

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You may have to pay more money to trade the ETF’s shares. This ETF will provide less information to traders, who tend to charge more for trades when they have less information.

The price you pay to buy ETF shares on an exchange may not match the value of the ETF’s portfolio. The same is true when you sell shares. These price differences may be greater for this ETF compared to other ETFs because it provides less information to traders.

These additional risks may be even greater in bad or uncertain market conditions.

The differences between this ETF and other ETFs may also have advantages. By keeping certain information about the ETF confidential, this ETF may face less risk that other traders can predict or copy its investment strategy. This may improve the ETF’s performance. If other traders are able to copy or predict the ETF’s investment strategy, however, this may hurt the ETF’s performance. For additional information regarding the unique attributes and risks of this ETF, please refer to the prospectus.

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