With technology disrupting almost every industry, how can you take advantage of the innovations leading the charge?
The next frontier: AI, Robotics and Automation
Artificial Intelligence, robotics and automation are all themes that 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, but 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 that 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 a variety of data, from digital signatures to employee analytics, and they even auto-fill online forms. The automation of manufacturing processes has also allowed for greater efficiency and reduced costs.
Driving change and disruption
The intent to embrace these technologies already exists and is growing. In Morgan Stanley’s 3Q19 CIO Survey, artificial intelligence and machine learning implementation was listed as the second highest priority IT spend for companies, preceded only by cloud computing2. 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 fantastically 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.
iShares Automation & Robotics ETF
The fund seeks to track the performance of an index comprising of companies from developed and emerging markets which are generating significant revenues from specific sectors associated with automatic and robotic technology. With around 130 holdings it offers diversified access to companies who are developing technology in the aforementioned fields.
With a total expense ratio (TER) of 0.40% it gives investors a very competitively priced investment vehicle for gaining exposure to the automation and robotics theme. Since its inception in September 2016 it has delivered annualised returns of 17.74%, outperforming its ETF sector and demonstrating the growth potential stemming from major structural drivers which include lower development costs, evolving technology and rising cost of labour.
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