Sanlam Global Artificial Intelligence

This fund 'eats its own cooking' using an artificial intelligence (AI) system to help find companies whose business models are aligned to benefit from this growing theme. The fund is unconstrained in that it can invest in businesses of almost any size and in more than just technology stalwarts; around half of the portfolio can be found in the healthcare and consumer-related sectors.

Our opinion

The combination of using an AI system to help pick stocks benefiting from similar technology is a stand out feature of the fund. Alongside a differentiated approach to looking at stocks, whereby the manager looks for companies that incorporate AI, rather than just making it, means this fund is a more diversified play on a theme growing in popularity.

Fund manager

Chris Ford joined Smith & Williamson in 2015 and set up this fund in 2017. When Sanlam purchased a range of Smith & Williamson funds in 2021, he moved over with the strategy. Chris earned his stripes working as an analyst on US small cap technology names in the late 1990s at Schroders – experiencing the tech boom and bust - before moving to Aegon where he ran the US and technology offerings until 2006. He then moved to Pictet where again he ran a technology fund as well as a global equities mandate.

We are at the start of the adoption of Artificial Intelligence. Companies able to capture the opportunity will enjoy considerable competitive advantages, across diverse sectors and markets.

Chris FordFund manager

Investment process

Chris uses a powerful system to analyse thousands of financial statements for keywords and phrases that indicate companies are incorporating AI into the future growth of their business model. This system also uses language translation to remove any country bias.

Initial screens will then remove stocks under £250m market capitalisation, which leaves an investable universe of around 500 stocks. These companies will not just be technology companies: they can be from any sector, but must have a core element of their future growth based around the benefits of implementing AI.

A more traditional fundamental analysis approach then follows: Chris and his team of analysts test the companies to ensure revenues are derived from AI. This is done by looking at five factors; the use of algorithms, sensing, AI application, high-powered computing, and data. More standard company fundamentals such as cash generation and balance sheet strength are also crucial considerations.

ESG

ESG - Integrated
All Sanlam funds integrate ESG factors into their research and decision-making processes. Their approach is fund manager-led and the investment team also has access to third-party data providers that report companies’ underlying ESG risks. These are incorporated alongside the managers’ own fundamental bottom-up analysis to assess potential risks to performance or ensure they are investing in a company that displays characteristics associated with responsible financial practices. The fund’s investment process identifies and focuses on a universe of transformative companies that address the world’s most pressing needs.

Sanlam is finding that, increasingly, these themes are dominated by Environmental and Social concerns. It believes that understanding corporate culture is of paramount importance in making successful investments, and invests a lot of time in looking to understand the governance and incentive structures within its portfolio companies. Sanlam engages with the management teams of the companies in which it invests, votes proxies, and is partnering to develop AI tools to help deliver greater ESG oversight.

Risk

While Chris is valuation conscious, there remains a bias towards the growth style of investment, which can go in and out of style. However, the spread of stocks from different sectors and diversified revenue streams, make it more diversified than a pure technology fund. The portfolio is concentrated at around 35 names and can invest across the market cap spectrum, meaning there can be relatively large positions in smaller companies, increasing the level of risk.

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