BLOG: How to capitalise on the Artificial Intelligence theme
Artificial Intelligence, robotics and automation are all themes which are becoming more prevalent within today’s society, and for investors, certainly have a lot of potential. We do not yet fully understand and are unable to predict the true impact of these technological advancements, yet the speed at which business and operational transformation is taking place via the implementation of these digital technologies is staggering.
Artificial intelligence (AI) is a branch of computer science which is allowing companies to move to a new standard of analysing data and helping them to garner more value from their assets, both physical and digital. By utilising rapidly growing datasets, businesses are able to drive innovation, increase efficiency and empower this data to generate societal and corporate profits.
Robotics have been around for some time with UNIMATE being the first robot to be used on a production line in 1962. Today’s examples include welding robots in factories, order picking robots in goods warehouses and even surgical robots used to improve clinical outcomes of patients through minimally invasive surgery. Additionally, as automation has allowed companies to use software to perform administrative tasks, robots now input digital signatures, auto-filling of online forms and employee analytics. The automation of manufacturing processes has also allowed for greater efficiency and reduced costs.
The intent to embrace these technologies already exists and is growing. In Morgan Stanley’s Q3 2019 CIO Survey, artificial intelligence and machine learning implementation was listed as the second highest priority IT spend for companies, preceded only by cloud computing. Traditional business models are certainly being disrupted. The benefits of these new and ever-improving technologies will expand well beyond just technology stocks; they will influence and drive change and disruption through numerous sectors and industries.
The investment case for these themes is clear for anyone to see. However, identifying the correct investments to exploit these substantial opportunities and putting them together in an efficient way is somewhat trickier. Below are a number of actively managed funds which look to capitalise on these increasingly important and impactful themes:
Smith & Williamson Artificial Intelligence
The fund is a particularly unique offering giving investors not only a chance to access companies benefiting from, or set to benefit from, AI but also giving access to an investment process using AI itself. Their proprietary AI platform is used to identify companies where economic value is directly affected by AI.
As more and more companies engage with AI, this fund is well positioned to provide strong exposure to secular investment growth of long duration, resulting in potential for very strong returns. The fund is well diversified and doesn’t rely solely on high allocation to the US and tech stocks; however, investors will need to accept a higher level of overall risk.
Polar Capital Automation and Artificial Intelligence
The team managing and contributing toward the investment process is thought to be the largest dedicated technology investing team in Europe. Their expertise and experience helps them to identify companies standing to benefit and capture the growth created by these long-term transformational themes.
The fund gives great exposure to companies enabling and involved in robotics, automation, AI and materials science. In doing so it has delivered annualised returns of over 15.5% since its inception in late 2017 – double that of both the benchmark and sector.
The fund mainly invests in companies contributing to, or profiting from, developments in robotics and enabling technologies. Pictet is arguably the leading thematic investing firm in Europe and their pedigree within this space speaks for itself. On a three-year basis, this fund has generated the highest excess return over its respective benchmark of any of Pictet’s funds – demonstrating the potential of this investment opportunity in particular.
The team believe the robotics sector is set to grow significantly faster than the broader economy over the coming years due to the ability of robotics to increase productivity, reduce costs and help solve challenges such as an increasingly elderly population.
Tom Rosser is investment research analyst at The Share Centre