Protect your AI investment, dead cat credit bounce, and the emerging safe haven asset you might not own

Alister Sneddon, CTO

Here are the top 3 insights for May 13th, prepared by Alister, our CTO.

Today’s Brief

  • EY: Three ways to protect your AI investment from a winter of discontent
  • Robeco: The outlook for credits: Dead cat bounce
  • UBS: The emerging safe haven asset you might not own, but probably should

Three ways to protect your AI investment from a winter of discontent

  • Touted as the “new electricity”, AI is expected to transform every industry — spawning new products and services, unlocking new efficiencies, creating new business models, driving new profit pools and delivering significant financial and human value.
  • Expectations of, and enthusiasm for AI has reached a new high, gaining a prominent position in the C-suite and with governments as part of their broader digital transformation efforts.
  • But we have seen this fanfare around AI before; first from its inception in the 1950s to the mid-70s and subsequently from 1980 to 1987.
  • Both periods were followed by an “AI Winter” — a period where funding declined, interest waned and research in the field went underground.

Genuine Scores for the top 3 IT Service stocks

  • Perspecta, 67
  • DXC Technology, 64
  • Western Union, 62

The outlook for credits: Dead cat bounce

  • We see the current rally as typical of bear markets.
  • At this stage in the cycle, the biggest risks are weakening earnings and, eventually, downgrades (investment grade) and defaults (high yield).
  • We think this is now playing out as evidenced by the many profit warnings that have been issued.
  • So why have markets bounced so vigorously?
  • A dovish Fed shift, expectations for a China trade deal and the backdrop of an oversold market late last year all help explain.

Genuine Scores for top 3 Globally focused Bond funds

  • PIMCO Short Asset Investment Fund, 100
  • Pioneer Multi-Asset Ultrashort Income Fund, 99
  • DFA Two-Year Global Fixed Income Portfolio, 99

The emerging safe haven asset you might not own, but probably should

  • While emerging markets bonds sold off in 2018, China government bonds outperformed;
  • Over a long-run time period China government bonds are showing all the traits you’d associate with safe haven assets;
  • We believe their position as a flight-to-quality asset will grow as China continues to reform, the index inclusion process progresses, and the RMB takes on a larger global role as a reserve currency.

Genuine Scores for the top 3 Greater China focused funds

  • UBS (Lux) Equity Fund— Greater China, 62
  • Schroder ISF Greater China, 56
  • First State Greater China Growth, 56

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All the best,
Alister and the Genuine Impact Team

p.s. all Genuine Scores are accurate as of the 8th of April