What are the key drivers for robotics as an investment theme?
We invest in companies benefiting from the rise of robotics, automation and AI, including the entire value chain of these markets. We build our portfolio as a result of bottom-up fundamental research, investing where we see the greatest potential for returns. We aim to benefit from the secular trends that underpin the growth of robotics as a whole, such as Moore’s Law (and the slowing of Moore’s Law), the growth of the cloud computing, edge computing, autonomous driving, electric vehicles, precision medicine. We believe that companies which take advantage of these trends and execute well will continue to deliver attractive returns over the medium term.
Which industries invest most in robots?
Industries that need precision, repeatability and cost efficiency in production have all heavily invested in robotics/automation. Automotive, industrial, semiconductors and information technology are all large end markets for our companies. Med-tech is another sector that is rapidly adopting robotics, for instance in robot-assisted surgery, diagnostics and precision medicine.
When did robotics become mainstream?
The modern robotics market began in the auto sector in the 1960s. Since then it has been on a long-term growth path. While parts of the industrial robotics market are more mature today, robotics as a whole is far from mainstream. Cobots (collaborative robots) are a good example of a market with great long-term potential that is just beginning to enter the mainstream. Cobots are smaller, cheaper, easier to control and program and work side-by-side with humans. Cobot functionality is rapidly advancing and will further improve as they are equipped with new technologies such as 3D machine vision. Other large markets such as autonomous driving are even earlier in their potential adoption curve.
How has the supply of industrial robots grown over the last 10 years?
The best data on this comes from a company called IFR. They believe that industrial robot shipments have grown at a compound rate of c. 13% since 2007. Perhaps more importantly they continue to have a positive outlook for the coming years.
In which countries do we currently see the highest robot density and why? Do you expect this to change?
Take the automobile market as an example. Industrial robot density is c. 4x higher at Korean auto manufacturers than Chinese OEMs, and almost 2x higher than German OEMs. These differences are even more stark outside the auto sector. This makes us optimistic- we see a long runway for growth based on the high robot density in an advanced economy like Korea. Anecdotally we see other signals for the potential growth of robotics & automation. We invest in some companies with an extremely high level of automation (90% or greater) at their production plants. They are quite close to achieving a fully-automated ‘lights out’ factory. Where these companies lead, we think others will follow.
Are robots a threat to people, e.g. taking over their work/jobs?
It is hard to know the answer to this question- there are different views from experts in Robotics/ Technology/ AI. We certainly think that robotic & automation technologies will continue with their rapid gains in capability and will therefore continue to displace jobs. This is the continuation of a very long-term trend towards automating routine work. However, as technologies like AI are advancing so quickly, we think that the level of job displacement in the coming years may be material. As a society we need to put in place structures to support people and help them retrain into areas of the economy where their skills are most needed.
How do you incorporate ESG in your investment process?
We use a combination of custom work and off-the-shelf tools to integrate ESG into our investments. We have a hard limit excluding companies from our portfolio which have material exposure to offensive military activities. We proactively engage with the management of companies that we invest in on important corporate/ESG issues. We also use third-party screens for Governance and ESG factors.
Can you explain in one sentence why people should invest in robotics?
Robotics, automation & AI are rapidly gaining in potential, as a result of secular technology and societal trends; we aim to use bottom up, fundamental analysis to take advantage of these long-term trends and deliver the growth of robotics as a theme to our investors.
About John Gladwyn, CFA
John is Senior Investment Manager, Pictet-Robotics fund. He joined Pictet Asset Management in August 2017 to co-manage the Pictet Robotics Fund. Before joining Pictet Asset Management John worked at Polar Capital on the specialist Technology investment team. Prior to joining Polar, John worked on a Global Equity investment team at Blackrock, which he joined in 2008. John completed his BA at Oxford University and has a Masters in Finance (Distinction) from London Business School. He is a CFA Charterholder.
