Finance

SMITH & WILLIAMSON ARTIFICIAL INTELLIGENCE: Smart money is on AI as new fund grows 43% in two years


SMITH & WILLIAMSON ARTIFICIAL INTELLIGENCE: Smart money is on AI as new fund grows 43% in two years

Artificial intelligence has been hailed as a key driver of the technological revolution taking mundane tasks out of the hands of humans.

Daring investors who back firms creating this ‘intelligence’ or putting it to use in business – or both – are likely to be the biggest financial winners.

Chris Ford and Tim Day, evangelists of this futuristic technology, are managers of the Smith & Williamson Artificial Intelligence fund. They aim to achieve healthy capital growth for investors by choosing the 35 companies that do it best.

Artificial intelligence: The fund invests in some established names and plenty of unknowns

Artificial intelligence: The fund invests in some established names and plenty of unknowns

There are some established names, as well as plenty of unknowns. Ford says: ‘We look at each stock on its merit.’

Ocado is one. It is not just a successful online grocer but also sells its sought-after ‘smart platform’ technology to rival supermarkets. This year it has signed three high profile deals (with Marks & Spencer in the UK, Target in the US and Coles in Australia) to sell its system to retailers keen to brush up their online offerings without working from scratch.

Ford says: ‘What is special is that Ocado’s system can be configured to what another retailer wants, so they can differentiate themselves.

‘Fulfilling robotic orders efficiently depends on the intelligence of systems. The use of artificial intelligence at Ocado is deep and broad. And the software it uses comes from its own developers.’

The £166million fund has grown 43 per cent since its launch two years ago

The £166million fund has grown 43 per cent since its launch two years ago

A less familiar holding is Australian firm Appen, which specialises in neural network simulation. This is where machine ‘brains’ are taught tasks so they can power applications such as a chat bots, or can do facial, speech and fingerprint recognition. Ford says: ‘The applications require a lot of data and Appen provides much of it to meet the rapidly expanding needs of platforms such as Google and Amazon.’

Ford also likes the company’s employment model, where it taps in to the general public for its expertise as and when required. The shares have made a strong contribution to the performance of the fund so far. 

Bought at A$9 (£5) in June 2017, when the fund was launched they have since shot up to A$23 (£13). Darius McDermott of investment analyst FundCalibre is a fan of the sector and fund. He says: ‘The growth in artificial intelligence and the number of areas it touches could be exponential in coming years.’

McDermott likes the fact the managers practise what they preach by using artificial intelligence as part of their own investment process. 

He says: ‘Software helps find companies whose business models are aligned to benefit from this growing theme. It analyses thousands of financial statements for keywords and phrases. The companies are then tested to ensure turnover and profit are driven by incorporating artificial intelligence into their business models.’

Ford and Day do not expect to lose their jobs to robots just yet. They still value face to face visits to companies to check out their human management credentials.

The £166million fund has grown 43 per cent since its launch two years ago and in the past 12 months has returned 22 per cent, against just 5 per cent for the FTSE All-Share Index.

It is still early days and tech firms have a habit of blowing up in investors’ faces. McDermott nonetheless calls the fund good value with a charge of just 0.55 per cent a year. He says: ‘It suits an adventurous investor as a satellite not a core investment.’

As it invests in growth firms unlikely to pay dividends it is not for income-seekers.

 

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