The Theme of All Themes: Applied Innovation
Is the Singularity Fund a theme fund? Not really. However, we do subscribe to a theme: applied innovation. By investing in the most important enabling technologies, we naturally cover the most relevant innovation themes: the ones that happen. We asked our CEO Evelyne Pflugi and CIO Pierre Guillier what we do differently.
The number of thematic funds is increasing. How do you explain this trend?
Pierre Guillier: Thematic funds are a marketing and client engagement tool. It’s about the stories that inspire investors and make their assets more relatable. To invest in a fund means to be invested in a cause. Customers identify with the topics they choose, they support them and/or strongly believe in their progression. After the tidal wave of passive strategies, thematic approaches, which usually have an active tilt to them, are a breath of fresh air. We feel this quite strongly in our relationship with investors — through our own theme of “applied innovation”, we form a community of interest, a network of like-minded people. Our clients want more than just an investment, they want unique and quality content, inspiring exchanges with our Think Tank fellows, and a personal connection with us.
What topics are particularly interesting from an investor’s point of view in the medium and long term and how do you cover them?
Evelyne Pflugi: Topics of interest range from mobility — for example, the “Internet of Cars” — and digital payment methods to the metaverse, the energy transition or sustainability. While for the media and some investors the hype and attention matters, our credo remains a pragmatic one: We focus on what actually happens and on what creates value. This distinguishes us from “classic” theme funds that are often heavily influenced by trends dominating the public discourse. What many theme funds have in common is that the hype or stories and their marketability come first, and only then asset managers find the appropriate equities to represent them.
For us, it is the other way around: We observe and monitor the most important enabling technologies, look at a global equity universe with an innovation lens, and discover what’s relevant from our vantage point. We focus on base technologies, those pieces within the value chain puzzle that together form and shape the true innovations of our time. This is how we naturally — and almost in real time — cover what moves the world.
To get back to the question of single themes that seem interesting: From conversations with our Think Tank fellows and by looking at companies’ innovation cash flows, it becomes apparent that new industrial processes in areas like materials, chemicals, or energy show massive growth potential. In the small- and mid-cap range, Asian companies seem to have an edge. The respective themes would be “Material Innovation” and “Asia Innovation” — not exactly topics that make headlines today, but topics that directly feed into some of the media’s content.
It is trends such as digitalization, renewable energies, new forms of mobility or nutritional trends that will greatly change people’s lives. Are we just experiencing a paradigm shift away from a regional to a theme-based investment approach?
Evelyne Pflugi: In the interconnected world of today, global challenges can be recognized and addressed as such. The examples of energy, mobility, and nutrition revolve around the fact that the current processes, systems, and lifestyles are overexploiting limited resources and creating challenging side effects like pollution or disease. Innovation is key to solving these associated problems.
It is the much bigger theme of ‘Innovation’ that is in need of a more concrete definition. It’s easy to fall prey to buzzwords. However, once you start dissecting them, you get to the underlying drivers and to the bottom of innovation. In our view, multiple technologies like Artificial Intelligence, Virtual Reality, and Robotics along with their value chains — often without much “noise” — converge to create a reciprocal effect that accelerates progress in numerous fields. Enabling technologies behind Artificial Intelligence and Robotics, for example, combine to allow more efficient resource management in buildings and infrastructure. Compute power, networks, and energy storage technologies create the future of mobility. Advances in biotechnology and materials processing join forces to create food in not only a different but also much more sustainable way. The most recent run for ‘New Food’ type theme products shows that investors increasingly want to put their money where it has an impact.
In a globalized world, themes make more sense than regional approaches. However, we think it may be best to combine both and invest in global applied innovation that spans all sectors.
If you want to know more about our strategy, follow us here or get in touch: info@singularity-group.com .
By Katharina Boehringer
