Innovation fund managers are looking for opportunities in ‘technologically inevitable’ sectors, spreading investment across pioneers, enablers, and adopters of emerging technologies.

Speaking to Wealth Investment News, Amati Global Investors fund manager, Graeme Bencke, highlighted the growth potential of innovative companies and the importance of minimising risk across the portfolio.

The WS Amati Global Innovation Fund looks to provide long-term capital growth by investing in companies that address key challenges in sectors Amati views as technologically inevitable, such as electrification, radiopharmaceuticals, and defence.

Bencke noted that while innovation often comes from early-stage businesses that may not yet have a stable business model (‘pioneers’), growth is often shared with the companies that support them (‘enablers’) and lateral beneficiaries (‘adopters’).

“Our approach is to review the landscape of companies and identify where the risk/reward trade-off is most attractive, and the companies exhibit the characteristics mentioned above,” he continued.

“This means we can gain access to the multi-year growth while taking minimal risk of loss over the cycle.”

The fund targets innovation trends that have already started but are still in their infancy, which are typically granular trends rather than macro scale events.

Assessed on a case-by-case basis, the fund managers aim to not be too overweight in any of the three categories across the innovation chain and provide a complementary offering to more traditional global funds.

Bencke, a former fighter pilot, highlighted several sectors of emerging technology that the fund's managers saw as opportunities: “There is a well-publicised increase in defence spending in the western world, within which we see a structural shift in spending towards technologies addressing the new global threats: drones and anti-drone countermeasures; cyber warfare; battlefield computing and sensors; next generation missile defence.

“Investor sentiment has soured on the broader electric vehicles theme but we think electrification is technologically inevitable. It will continue to progress, if less visibly. Plug-in hybrids, extended-range hybrids, improved batteries and the replacement of hydraulics with electrification in areas such as steering and braking.

“The Covid boom and post-Covid slump in the e-commerce and logistics industry is now behind us. New automation technologies in retail and logistics, such as RFID, Electronic Shelf Labels (ESL) and machine vision are enabling store and warehouse operators to increase productivity, mitigate labour shortages and cost and to be able to trace their inventory in store and in the supply chain.”

Bencke also pointed to radiopharmaceuticals, noting that this new approach to diagnostics and treatment of cancer and other conditions combines precision medicine and radiotherapy.

“It is poised to become a clinical gold standard in treatment of some cancers and has broader potential beyond oncology, for example in Alzheimer's disease,” he added.

“The innovation frontiers we are looking for reflect a change in an industry which has already begun but is still in its infancy.

“The innovation frontiers we invest in are typically making such a material improvement that they become technologically inevitable.”

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