Asian asset manager Nikko believes the current technological change is the greatest since the commercialization of electricity. How can I invest?
AThey say the future is traded on the stock exchange. Often enough, the future only means the continuation of the past. Not so for asset manager Nikko, which is one of the leading companies, especially in Asia. Two years ago Nikko bought into the American company ARK, which specializes in one topic: disruptive innovation, i.e. technology that changes the world. A fund has also been on the market in Germany since spring.
“I know that something like this is invoked over and over again,” says Renato Leggi, fund manager for ARK Invest. “But the times we live in today are really unique from a technological point of view. Since the commercialization of electricity in the 19th century, there has not been such a density of innovation that changes the world as much as it is now. “
Leggi lists five areas that are currently subject to technical upheavals: DNA sequencing, the interaction between humans and robots, energy supply, artificial intelligence and the blockchain.
Don’t access it too early or too late
When investing in future technologies, the right time is ultimately decisive, says Leggi. While this is a truism, it is difficult to achieve in practice. “Twenty years ago, stocks from the area of personalized medicine were already in demand, but the underlying technology, DNA sequencing, was still far too expensive at the time. That didn’t work out well for investors because it was just too early. ”ARK therefore relies on industries if the breakthrough is expected within five years. Then the probabilities can already be estimated, but not yet priced in.
ARK never focuses on a single topic. One pursues strategies and sub-strategies, if one does not prove to be successful, then another does, says Leggi. That is always better than following the market and being punished for mistakes with everyone else. Because that leads to losses that really hurt. It would be better to be punished alone. “If you’re wrong once, the losses don’t hurt as much as if you’re wrong with everyone else. But if you get it right once, the possibilities are great. The bottom line is that the opportunity-risk profile is unequal in a positive way. “
Two points are central to Leggi in a future industry. On the one hand, the technology must lead to sharply falling costs in the foreseeable future. On the other hand, it must be able to be used across industries. DNA sequencing, for example, is changing not only medicine, but also agriculture. If a technology is limited to one industry, the probability is too great that it will not catch on. When it comes to innovations, one shouldn’t deduce their impact from one’s personal environment. Electromobility, for example, is a much bigger topic in America and Asia than in Europe: “And industrial applications are often much more important than the hype about applications for end users such as 3D printing.”
Once such a future industry has been identified, it is important to separate the winners from the losers. “And we think there will be a lot of losers because these will be markets where the winner will take everything or at least most of it. You can invest in anything, but that’s not very promising. ”In the end, it’s all about the highest market share. It is important that profits are reinvested in order to create advantages. Anyone who pays dividends in a future-oriented industry is more likely to try to save something that has already broken.
ARK deliberately relies on listed companies and not on private equity. It is true that companies nowadays remain private longer, but listed companies and their technology are then also more mature. Around four billion dollars have been invested in Nikko’s “Disruptive Innovation” strategy. The fund for private investors, with its various tranches, amounts to $ 1.5 billion. Since the fund was launched less than twelve months ago, not much can be said about its performance.