Investing in robotics
23 JUL, 2020
By Constanza Ramos
The potential use of robotics across various industries is seemingly endless and many experts believe that the global COVID-19 pandemic has accelerated the need for the adoption of robotics. Low-touch economies and social distancing have become necessary in our 'new normality' and both are extremely conducive to the use of robotics.
Examples of the adoption of robotics in sectors beyond the most common industrial assembly line modernization are in healthcare, where nanorobots are a budding field at the intersection of biotechnology and engineering, consumer products, where robot vacuums and kitchen appliances can now essentially speak to one another, and retail services, where robots can replace humans in repetitive, labor-intensive jobs.
When it comes to robotics as an investment theme, assessing, evaluating and selecting investment opportunities across the robotics horizontal requires extensive research and expertise, and can offer investors the opportunity to be a part of the technology of the future.
Pictet Robotics, automation, enabling technologies and consumption
Peter Lingen, co-manager of Pictet Robotics
Pictet Robotics is a global investment thematic fund, based on megatrends, which invests in robotics, automation and artificial intelligence industries. Launched in November 2015, it reached four billion by March 2017 and had to be closed to new investors. It now manages 5,615 million EUR.
Global investment in robotics and artificial intelligence industries is at intersection of several megatrends, along the value chain, where we identify about 225 companies and select those with more than 20% of sales related to the theme, excluding those active in military equipment. We score their business model, management and financial attractiveness, taking into account liquidity and volatility, for a portfolio of 40 to 60, which contribute especially to United Nations Sustainable Development Goals "Industry, Innovation and Infrastructure" and "Decent work and economic growth".
The greatest potential is in collaborative robots, much more flexible, small, safe and cheap, with annual 10% growth in a market of $24.4 billion by 2025, in addition to industrial automation, enabling technologies and consumer-related applications and services. The idea is to diversify to mitigate company or technology risk, but to reflect high conviction.
Recently, companies have continued to warn on earnings calls, but the market is looking towards a recovery, helped by improving leading indicators and optimism around potential treatments/vaccines for CoVid-19. Macroeconomics conditions remain negative, albeit less than in previous months and we continue to watch the risk of a second wave of infections as well as tensions re-escalating between US and China.
In any case CoVid-19 has clearly changed the short term path for economies and companies across sectors. Fortunately many of the companies in which we invest are able to continue operating fairly normally and in general balance sheets are relatively strong across the fund. The coronavirus will pass in time and people will eventually return to their normal consumption patterns. In act the fund has outperformed the second quarter in its three segments. Within Automation it has been the case of Twilio, Synopsys and Splunk, within enabling technologies of Infineon and Microchip Technologies and within consumer services & applications Alphabet, iRobot and Intuitive Surgical. We added positions in Infineon, Lam Research and Zendesk, but trimmed in Autodesk, iRobot and Twilio.
