We asked three fund managers in the robotics space why now is a good time to invest in the sector, and which areas of the robotics, automation and artificial intelligence (AI) sectors they find the most interesting.
“The level of [artificial] intelligence has increased enormously making now a really good time to invest in the sector”
Fund manager, Axa World Funds Framlington Robotech Fund
The Axa Robotech Fund was first made available in the EU in December 2016. Tom Riley manages the fund alongside industrial sector specialist Jeremy Gleeson.
Riley said: “Robots have been around since the 1970s when they were first deployed in car plants. Over the past five years, the level of [artificial] intelligence has increased enormously making now a really good time to invest in the sector.
“Other important advances mean that collaborative robots (cobots) are now deployed alongside people in production lines, sometimes behind safety cages. Many have been developed to be responsive to touch pressure (that is they shut down when touched) and can recognise when humans are in the vicinity. Cobots are increasingly used alongside people in electronics testing rooms for circuit boards and mobiles, too. There is no longer a huge upfront capital expenditure for these machines.
“The most interesting sectors in this space are automation, healthcare and transport. In the 1920s, Ford mass-produced its first model and Henry Ford famously said, “the car can be produced in any colour as long as it’s black”. By contrast, there are currently 14 million different variants of Mini, and producing them requires vast levels of inventory management helped by automated technology and robotics. The technology has enabled mass customisation.
“Robots and automated technology are also used in predictive maintenance work and can tell production-line managers when machines are likely to fail. This limits down time, meaning there are fewer delays downstream on a production line. They have become big in healthcare, too. There is a lot of robot-assisted surgery with 750,000 soft tissue procedures (such as hernia repair) done like this last year.”
Day change: 0.84%
Sector: Equity Technology
Fund size*: $104.17m
Share class size*: €27.4m
Max initial charge: –
Ongoing charge**: 0.79%
* As at 24 May '17
** As at 31 Dec '16
Johan Van der Biest
Fund manager, Candriam Equities
B - Robotics & Innovative Technology C Acc
The Candriam Robotics & Innovative Technology Fund was set up on 1 December 2016 and is run by Johan Van der Biest. The fund focuses on nine set themes drawn from the robotics, AI and technology universe, with all companies having to draw at least 30% of their revenues from the robotics industry.
Van der Biest said: “The technology evolution has provided unlimited access to storage capacity and computational power, this has given a huge boost to the robotics and technology arena. There are demographic pressures such as the ageing population, which increase the demand for robots in the social sphere to help care for or provide company to people. There are so many applications for this technology – chat bots, robo surgery and autonomous cars are just three.
“Germany and Korea are currently the most advanced countries in terms of robot density (largely as a result of their automotive sectors) with China and the US still lagging. But China made it clear in its Made in China report that it planned to invest significantly in the sector. It currently has a density of 67 per 10,000 people and plans to grow this to 300 by 2025.
“The fund was originally a traditional tech firm but we redefined it as robotics and innovative technology. We also changed the investment process because several big tech companies such as Cisco, Intel and IBM have missed the innovation boat and have not shown any revenue growth for several years in a row. And, frankly, they are so big now that any initiative into innovative technology hardly moves the needle. Technology should improve people’s lives. The robotics industry will see jobs lost at the bottom and mid-end with more jobs created at the top. More than ever, we are living in the age of talent. Job loss has been a concern during every revolution but we rarely see it on any great scale.”
“The robotics industry will see jobs lost at the bottom and mid-end with more jobs created at the top. More than ever, we are living in the age of talent”
Day change: 0.34%
Sector: Equity Technology
Fund size*: $269.79m
Share class size*: $109.97m
Max initial charge: 2.5%
Ongoing charge: 2.08%
* As at 23 May '17
Fund manager, Credit Suisse (Lux) Global Robotics Equity Fund
The Credit Suisse Global Robotics Equity Fund was launched on 30 June 2016, and invests in ‘pure-play’ stocks in AI, automation and robotics. The fund is managed by Angus Muirhead CFA, who has 20 years’ experience investing in the tech sector, and his colleague Dr. Patrick Kolb.
Muirhead said: “We only invest in pure plays. When a client invests in a thematic fund, we believe we should deliver as pure an exposure to that theme as possible. Therefore we only invest in companies which derive the majority of their revenues from the sale of robotics, automation or artificial intelligence.
“Our clients often invest in the fund as a ‘satellite’ to their core investments, since they understand the long-term secular growth opportunity and are looking to add alpha or specific factor exposure to their portfolio. Our focus on pure-plays in robotics and our bottom-up research-based approach means we tend to invest in smaller companies, since this is where we find the most technological innovation and the most entrepreneurial management teams. Two-thirds of the fund today is invested in companies with market capitalisations below $10bn.
“The cost of a factory robot on an hourly basis is already cheaper than the all-in cost of a factory worker in China”
“The time is ripe for robotics because: 1) Factory robots are already cheaper and more productive than their human counterparts in China and other low-cost areas. 2) Robot ‘density’ remains very low. The IFR estimates there are currently on average just seven robots per 1,000 workers in global manufacturing industries, meaning there is room for growth. 3) But most importantly, the considerable advances in technology in recent years means that robots are now becoming easier and cheaper to manufacture. They are also smarter and more capable of performing a wider range of tasks than ever before, both inside and outside the factory, touching many other areas of our daily lives.
“We’re seeing a similar transition to that experienced by the mobile-phone market 10 years ago. Advances in semiconductors, memory, battery and software have allowed a once highly-consolidated industry to fragment and make huge strides in penetrating the world market with cheaper but also far more versatile mobile devices. We believe the same shift is now visible in the robotics market, with artificial intelligence and collaborative robots being great examples of this new generation of smart-robotics.”
Day change: -0.4%
Sector: Equity Technology
Fund size*: $370.16m
Share class size*: $147.8m
Max initial charge: 5%
Ongoing charge: 1.85%
* As at 23 May '17