Polar Capital Artificial Intelligence

This fund is built around the belief that artificial intelligence has moved beyond being a future technology theme and is now becoming embedded across the global economy, creating investment opportunities well beyond the technology sector. The managers believe AI will create a widening divide between companies that embrace the technology and those that fail to adapt, making it just as important to avoid future losers as it is to identify future winners.

Unlike traditional technology funds, the strategy invests across the global equity market rather than being confined to the technology sector. The portfolio is built around two complementary groups of companies: AI enablers, which provide the infrastructure, computing power and software supporting AI development, and AI beneficiaries, which are using artificial intelligence to improve productivity, increase margins, grow revenues or strengthen their competitive position. This broader opportunity set allows the managers to capture value throughout the AI adoption cycle rather than relying solely on technology companies.

The process begins with quantitative screening to identify an initial universe of around 500-600 potential AI winners. This is reduced to around 200 to 250 stocks with strong fundamentals. The managers favour companies benefiting from long-term structural growth trends that demonstrate strong cash generation, robust balance sheets, high barriers to entry and experienced management teams. Valuation remains an important consideration, with every investment assessed to ensure future growth prospects justify the current share price.

The final stage of the research process focuses on identifying where artificial intelligence is likely to create meaningful economic value over the next two years. Rather than attempting to forecast distant technological developments, the managers focus on companies where AI is expected to deliver tangible improvements in earnings, margins or competitive advantage within a realistic timeframe.

The portfolio is constructed on a high-conviction, benchmark-agnostic basis and typically contains between 50 and 80 holdings. Although around half of the portfolio is invested in technology companies, the managers also invest across a range of other sectors where artificial intelligence is expected to reshape business models and profitability. Position sizes reflect the managers’ level of conviction while maintaining diversification across companies, industries and AI-related themes. The portfolio is led by Xuesong, supported by Polar Capital’s wider team of specialist technology analysts.

Artificial intelligence is a long-term investment theme, but companies exposed to it can experience significant share price swings. As a result, this fund is likely to be more volatile than a typical global equity fund, particularly during periods when investors become less optimistic about technology or growth companies. The managers seek to reduce risk by investing across both companies developing AI technologies and businesses applying AI in different industries, rather than relying on a single part of the market. The portfolio is also diversified across 50-80 holdings and is reviewed continuously as technology evolves.

ESG analysis forms part of the research process and stewardship activities, although financial returns remain the primary driver of investment decisions.