Someone’s wrong: business travel vs Zoom
One of the biggest business changes brought about very quickly by the pandemic was the move from...
It’s now week 38 of working from home for this FundCalibre employee. While I don’t miss the commute, I do miss my colleagues and my friends – and my space.
Living on top of each other 24-7 has had a bit of a strain on family life, particularly during periods of home schooling. And, while we’ve managed to discover some wonderful walks where we live and a love of puzzles and board games, I won’t lie – I think it’s the computer games and multiple streaming services that have saved us.
Netflix is a particular favourite in our house – not just because of the new content that is added but also because it makes watching TV so easy. It tells us what we should be watching, recommending new things we might like as soon as we’ve finished binge-watching a show.
How does it do this? Through artificial intelligence and machine learning. Quite frankly it’s been a god-send, and I find the technology and science behind it fascinating.
I’m not alone. Just over three years ago, Smith and Williamson launched a new fund investing in this very area: Smith & Williamson Artificial Intelligence. And little did it know how some of the investment trends may be accelerated by a global pandemic.
In his latest update, co-manager Chris Ford said, “Where lockdown has introduced new and better ways of doing things, we would expect that many people will be much less willing to revert to the ‘old’ ways, even when the vaccine has been rolled out.
“Companies will look to streamline and strengthen supply chains, they will gravitate away from capital-heavy business models and, in some sectors, there will be a move towards onshoring. Given the relatively high labour costs in the developed world, this will provide a significant tailwind for automation and the wider adoption of AI solutions more generally.
“In terms of where the AI theme evolves from here, we would expect travel/ticketing, logistics and warehouse management to provide a whole raft of opportunities for AI deployment as economies reopen.
“And the big structural themes that we have discussed for years – the growth and prevalence of data, increasing levels of automation across almost all sectors and perhaps most crucially the adoption and expansion of AI in healthcare – will continue unabated.
“We would also like to flag a development which we believe could be transformational. At the end of November, Google’s DeepMind unit announced that it had cracked a massive scientific problem that has stumped researchers for 50 years. Using its latest AI program, AlphaFold, the company has showed it can predict how proteins fold into three dimensional shapes. This is a hugely complex process that is essential to the understanding of life – put another way, when something bad happens to a human from a health perspective, it is very often determined by a change in proteins. For example, how insulin regulates sugar in the blood and how an antibody fights coronavirus are both determined by protein structure.
“DeepMind’s stunning breakthrough opens the door to everything from tailored medicines and more nutritious crops to ‘eco enzymes’ that could be used to break down plastic pollution in seas and rivers. This, for us, encapsulates the real power and attraction of AI as an investment theme.”
TM CRUX UK Special Situations
Artificial Intelligence, big data and the Internet of Things are among the trends that manager Richard Penny is looking at for this fund, so we asked him more about it. “I listen to the Exponential View and FYI podcasts where AI features from time to time. Both feature Venture Capital and US quoted stocks, but occasionally I find something from the UK too that’s got really interesting stuff that the market hasn’t landed upon yet,” he said.
“It’s one of my themes, but there are not many plays on it in the UK right now. Weirdly, in the last 24 hours I may have found one Internet of Things opportunity, one machine learning (AI) play, and one electric vehicle proxy – three different stocks. They are all small and in the early stages of their development but have spent lots of time and money getting to know customers.”
Polar Capital Global Insurance
Nick Martin, co-manager of this fund, pointed out recently that insurers are the original data companies. “AI and especially machine learning, is now widening the gap between the good and average/bad underwriter,” he said.
“Better data is enhancing the understanding of risk, which enables the industry to address the significant protection gap between insured and economic losses. The long term opportunity for the industry is to evolve to high value added risk prevention and away from just writing a cheque post a loss.” It’s effectively helping to improve products, give price competitiveness and enable cross-selling opportunities.
Baillie Gifford Japan Trust
Speaking recently about opportunities in Japan, manager Matthew Brett said, “In automation, technology improvements are creating new opportunities ranging from more dexterous collaborative robots (cobots) that can work alongside humans to perform a variety of new tasks, to greater adoption of artificial intelligence and machine learning to allow for predictive maintenance and a more efficient operation of the factory floor.
“In 2018, global industry sales for cobots amounted to $500 million in revenues (compared to $16 billion for industrial robots). However, some research bodies expect this to rise to $10 billion by 2025.”
Scottish Mortgage Investment Trust
Co-manager, Tom Slater, discussed the use of data on a webinar recently. “To my mind, the investment case for the likes of Facebook and Twitter has been reduced as their decisions about how content should be disseminated isn’t growth or innovation any more.
“The more interesting area is in genetic research. If you think there are 7 billion people in the world and each have 6 million genetic variations, vast data sets here and being able to read one gene at a time is displaying the real power of machine learning. You can look at the pathways for action for health problems. That’s where the innovation is and where the investment opportunities lie.”