Artificial intelligence (AI) is driving change across the global economy.

The influence of AI is set to permeate every sector worldwide as its reach continues to accelerate and broaden, creating compelling investment opportunities.

Recent years have seen a massive cost compression in the generation, storage, transfer and use of data, facilitating better-informed business, consumer, and investment decisions. As AI-enabling technologies become cheaper and easier to access, more and more companies are engaging with AI, transforming their business models, and increasing their competitive advantage.
 

The Sanlam Artificial Intelligence Fund seeks to identify companies whose engagement with AI is likely to make a material difference to their long-term economic value.

In a large and growing investment universe of approximately 20,000 names, detailed bottom-up research and analysis is supported at the initial screening stage by a proprietary AI platform that helps to identify possible companies whose future economic value might be directly influenced by AI. As more companies harness AI technology, the opportunity set continues to extend and deepen, perpetually raising the bar for inclusion in the portfolio.

 

Meet the growth equities team

Chris Ford
Chris Ford
Fund Manager
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Tim Day
Tim Day
Fund Manager
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Giles Worthington
Giles Worthington
Fund Manager
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Why invest in the fund?

  • Pioneers of this transformational investment theme of long duration

  • AI can facilitate solutions to enduring economic, social and environmental problems

  • Not a tech fund - Investment across a wide range of sectors & regions

  • The combination of using AI to identify opportunities and the Fund Managers’ experience gives us a competitive edge

  • We aim to provide exposure to growth and greater resilience than a narrowly focused theme such as automation or robotics.

The fund was one of the pioneer AI funds within Europe when it launched in 2017 and provides exposure to companies benefiting from the growth or deployment of artificial intelligence. All positions within the fund are held on merit - we employ a high-conviction approach and don’t use a benchmark. This ensures there is ongoing competition for capital in the fund.

Our approach works because we are genuinely agnostic about where we invest – that is, our investment universe does not begin and end in Silicon Valley. Our AI platform is a constant source of new ideas as it can scour company documents in a range of different languages (alphabetic and logographic), searching for the elements of AI that we have defined.

What stocks does the fund hold? 

Within the fund, we hold a mix of established companies that are engaged with or deploying AI, as well as newer companies that are using or developing AI applications. We aren’t solely focused on the enabling technologies of AI – this is important because non-tech areas like healthcare, financials and the consumer and industrial sectors are all beginning to harness the power of AI.

We think it’s crucially important that investors understand that AI will permeate almost all areas of the global economy, and that is reflected in the composition of the fund.

Environmental, Social and Governance

Active and ongoing engagement with companies rather than outright exclusion. We believe that over the long term, integration of robust ESG policies make good business sense.

  • We have always been mindful of issues which may impact the sustainability of returns over the medium to long term
  • ESG issues are considered when they may have a material impact on investment risk or return

We partner with MSCI, a global ESG and corporate governance provider, and ESG is fully integrated as follows:
 
  • All teams have access to the detailed ESG reports so include this risk analysis as part of their due diligence
  • Comparable company scores allow for best-in-class analysis at the sub-industry, sector and regional level
  • Quarterly investment committee meetings review ESG reports on each fund, looking at the overall score and challenging on the riskier or more controversial holdings.

 

 

AI will permeate almost all areas of the global economy.

Chris Ford, Fund Manager

Fund Commentary

October 2021

Market/macro backdrop
Global equity markets rallied in October as they were buoyed by a positive start to the third quarter US earnings season and hopes that the problems in China’s property sector could be contained. Stylistically, growth outperformed value over the month, leaving the two broadly neck and neck in US dollar terms for 2021 to date.[1]
 
For the month, the MSCI World index produced a performance of 4.0% in GBP terms (5.7% in USD). Regionally, emerging markets underperformed developed markets as Latin America had another difficult month while in developed markets the US was the standout performer. For the year to date, the S&P 500 is now up 24.0% in local currency terms.[2]

 

Performance vs sector/benchmark
The Fund produced a performance of 4.1% in October (source: Morningstar – GBP Z Acc share class).
The Fund is not managed against a benchmark or specific sector index.



Past performance is not a guide to future performance. Total return, NAV to NAV basis, net of charges, assumes net income reinvested.


Positive and negative contributors 
Positive contributors:                     Tesla, Alphabet, UnitedHealth
Negative contributors:                   MercadoLibre, Zendesk, FANUC

Significant portfolio changes - buy/sells 
During the month we started rebuilding a position in Coupa Software, a leader in business spending management. Its cloud-based platform enables companies to manage all their transactions across procurements, payments and the supply chain. Clients include Sanofi, Pearson, Salesforce and Barclays.

Corporate/team highlights
We are pleased to report the Fund has continued to attract inflows and by early November assets under management stood at £970m.[1]

 
[1] Source: Morningstar, 2 November 2021.

Outlook
Whilst markets are currently digesting the impact of higher ‘risk free’ bond yields, stubborn inflation and the announcement of the Fed’s taper, we think it is worth taking a step back and assessing some of the themes that could play out over the next few years. A recent report[1] for the World Economic Forum by McKinsey suggests that the next ten years will see more innovation and technological change than was observed in the preceding 100 years. Key cross-sector or ‘industry agnostic’ trends include next level process automation (important given ongoing labour shortages in the developed world), connectivity, distributed infrastructure, next generation computing (including quantum computing), applied AI (e.g. computer vision, natural language processing, speech technology), and a reboot of software programming (which McKinsey labels as ‘Software 2.0’ and which could see a 30x reduction in the time required to develop software and analytics). Industry-specific themes include the bio revolution (e.g. biomachines, biocomputing), next-generation materials (e.g. nanomaterials, graphene) and clean energy generation technologies as the world tries to mitigate the climate crisis. We will discuss the opportunities presented by these themes in the coming months.
 
[1] The Top Trends in Technology, McKinsey, October 2021.
Explore the details
Designed to provide long-term capital growth through diversified exposure to one of the global economy’s most important and enduring investment themes – artificial intelligence (AI).

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Fund Risks

Past performance is not a guide to future performance. Do remember that the value of an investment and the income generated from them can fall as well as rise and is not guaranteed, therefore, you may not get back the amount originally invested and potentially risk total loss of capital. A table with five years’ performance is available in the fund factsheets.

The Fund may invest in  shares of companies listed on stock exchanges in the United Kingdom, and outside the United Kingdom, exchange rate fluctuations may cause the value of investments to go down as well as up.  Investing in companies based in emerging markets may involve additional risks due to greater political, economic, regulatory risks, among other factors. The Fund may invest in derivatives for the purposes of efficient portfolio management and hedging. 

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