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Polar Capital tech team join robotics fund race

Citywire-rated technology fund managers at Polar Capital are latest to launch an artificial intelligence fund tapping into the rise of robots.

 
Polar Capital tech team join robotics fund race
 

Polar Capital, the independent investment group best known for its technology expertise, has launched a fund seeking to capitalise on the growing commercial use of artificial intelligence and robots, which a new report says has reached a‘tipping point’.

The Polar Capital Automation and Artificial Intelligence fund will be run by Xuesong Zhao, Nick Evans and Ben Rogoff, the Citywire A-rated team that manage the $1.6 billion, dollar-denominated Polar Capital Global Technology fund in Dublin. Rogoff is also lead manager for the £1.4 billion Polar Capital Technology (PCT)  investment trust in London.

The new fund will invest in four areas; industrial automation, artificial intelligence (AI), robotics and materials science, and will aim to beat the MSCI All Country World stock market index. It will charge 1.3% a year and levy a 10% performance fee when it beats its benchmark.

It will invest in 50 to 80 positions and have a broader mandate than Polar Capital’s technology funds, with a higher proportion in industrial stocks and a lower weighting in the US, which will account for 40% of the portfolio. The existing technology funds hold 65-70% in the US. 

Instead there will be greater exposure to Japan and Europe, which are viewed as ‘centres of automation and robotics excellence’.

‘Automation represents a large adjacent technology-enabled investment opportunity while over the next three to five years we expect to see disruptive AI use-cases emerge that should unlock significant value for investors,’ said Rogoff.

He added that intelligent machines will ‘require a rewriting of fundamental design and manufacturing principles’ that could prove as significant as ‘the introduction of just-in-time inventory management’ that reinvented logistics in the 1980s.

The themes identified by the fund should see ‘multi-year transformations’ and should drive growth and re-rating of companies as they become more ‘infused’ with technology, added Zhao.

Polar Capital willl hope it can emulate the success of Pictet Asset Management which has had to curb new investment into Pictet-Robotics  after assets in the Luxembourg fund swelled to nearly €3 billion two years after its launch.

Peter Lingen, its Citywire AAA-rated fund manager, has denied a speculative bubble was forming in the niche area, explaining that the number of companies he could invest in had grown in the past two years.

'There are areas which we have not addressed so far, for example, business process automation, which opens up new interesting opportunities for the fund in the longer term.

'Healthcare companies have been an excellent area for investing as well as larger companies targeting spin-out businesses,' Lingen told Citywire.

UK investment group Smith & Williamson launched a thematic AI fund earlier this year. The sterling-denominated Smith & Williamson Artificial Intelligence fund is run by former Pictet managers Chris Ford and Tim Day. It invests in companies that derive most or all of their revenues and growth from AI and also uses AI in the investment process, using a ‘proprietary model’ to enhance stock-picking efficiency and identification of companies to invest in.

The fund launches reflect growing investor interest in AI and robotics. David Kelnar, investment director at MMC Ventures, said AI adoption was ‘nascent’ but ‘crossing a tipping point from early adopters to the early mainstream’ making now a good time to identify investment opportunities.

In a report for Numis Securities, Kelnar said investors should ‘consider developing a basket of AI-driven investments’.

‘Five of the world’s 10 most valuable companies - Alphabet, Amazon, Apple, Facebook and Microsoft - are repositioning to become AI-first organisations,’ he said.

Although the last 10 years have been building a mobile-first world, the next decade will be focused on an AI-first world.

‘While hype around AI is at a peak, and some expectations may exceed results in the short term, we believe AI represents a paradigm shift in technology that warrants the attention it is receiving,’ said Kelnar.

‘In 2017, AI reached an inflection point, driven by milestones in investment, capability, entrepreneurship and adoption. The implications for consumers, companies and society will be profound,’ he said.

According to Boston Consulting, the industry is expected to grow four times faster than the global economy over the next decade.

 

5 comments so far. Why not have your say?

Law Man

Oct 17, 2017 at 17:59

An AMC of 1.3% p.a.; add something for transaction charges; add a platform fee of 0.45% to HL - and we have about 1.8% lost every year; and a performance fee on top.

Too expensive for me.

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Abstract Artist

Oct 17, 2017 at 22:04

Agreed Law Man. Why can't they just introduce these robotics companies to PCT, are robots and AI not tech enough?

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Micawber

Oct 18, 2017 at 07:58

They need to beat the robotics ETF ROBG which has done me very nicely

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daiva slevin

Oct 18, 2017 at 17:25

Lawman

You are right about these charges, its all about greed and idiots that will invest?

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Norman Brown

Nov 16, 2017 at 17:11

Clearly AI will form a significant part of PCT (and ATT for that matter) but both of those have to compare to a general ICT index so, even if the managers believe AI will grow faster than Tech generally, they will be constrained to some extent by AI's weighting in the broader ICT indices. This fund will permit an unconstrained approach.

However, the mangers are unproven in this area. I can see the argument for an Investment Trust which can delve into unquoteds, but an OEIC seems to be too similar to the much cheaper ETF.

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