Event Voice: Your Questions Answered by GAM at the Thematics Market Focus

clock • 4 min read
Event Voice: Your Questions Answered by GAM at the Thematics Market Focus

Can you give a brief overview of your strategy in terms of what you are trying to achieve for investors, your investment process and the make-up of the investment team? 

GAM Disruptive Growth strategy is managed by Mark Hawtin, Investment Director. He is supported by Investment Managers responsible for fundamental and technical research to assist with portfolio construction and risk management. Portfolios are also subject to a wider system of risk management controls undertaken by the dedicated internal risk management personnel.

The team believes the strategy offers a compelling investment opportunity as the last decade has seen technology move from being a vertical dominated by software and hardware vendors, to an economic horizontal, where the way technology is used is far more significant than the technology itself. Technology affords the opportunity for companies - across all sectors - to start from ground zero and develop disruptive competitive new business models.

The team seeks to capture the unprecedented investment opportunities that have arisen due to the explosive growth of the connectivity. The range of possibilities presented by the enormous increase in mobile subscriptions users worldwide, the replacement of knowledge-based jobs with technology, machine-to-machine communications and the relentless evolution of cloud computing, coupled with the abundance of high quality, well-established but misunderstood companies create a compelling investment case.

The network effect, coupled with new and fast-growing technologies such as artificial intelligence, the internet of things, big data and blockchain, will drive the disruption of technology across sectors and shift the focus from technology providers to companies enabled by technology, resulting in a wealth of opportunities for experienced investors.

The strategy differs from competitors as we invest in companies which deploy technology in a highly intelligent manner to drive profitable and sustainable supernormal growth. This unique view has led to considerable outperformance while still managing risk judiciously.

How are you positioning your portfolio for 2022 and what will be key issues for investors? 

We believe 2021 has set the market up for positive opportunities for active management in 2022. The key themes that we are focused is  Digital 4.0 first - this is, in our opinion, the fourth major digital wave and will bring the internet of everything to sectors less disrupted to date. These include financials, healthcare, industrials and transportation. Significant advances in AI will likely drive investment in innovation by existing category leaders to both take additional market share and to develop new revenue streams. The nascent but rapidly expanding Metaverse is an area within digital 4.0 that we are excited about. These themes could likely lead to revenue and earnings growth that exceeds market expectations and thus creates the delta that we look for.

It will not be a one-way market and care will likely be required, particularly where valuations cannot be supported. The focus in a more risk averse world is likely to be on profitable companies with growth that trade at a discount to fair value. This will be a prime area of focus for us in 2022.

There are also areas that we are looking to avoid. WFH names continue to look expensive with a few exceptions, and plain vanilla e-commerce will find the going increasingly difficult.

The outlook remains positive for disruption and the onslaught of an ever more digital world. This will, as ever, emphasise the divide between the top and bottom performers, thus potentially increasing the alpha generation both through finding those top performers but also by avoiding bottom performers

Can you identify a couple of key investment opportunities for your fund you are playing at the moment in the portfolio? This could be at a stock, sector or thematic level. 

There are some areas that we think have outsized upside in 2022 as the market recovers from either shocks (in the case of China) or hype cycle factors (in the case of SPACs).

China has been beaten down extensively in 2021 and we are optimistic to see an opportunity that could benefit from this as the regulatory picture becomes clearer during the first half of 2022.

SPACs could likely become a really viable and accepted route to market for companies unwilling to pay exorbitant investment banking fees and unwilling to have long-standing employees locked up for extensive periods post listing. We are watching the space closely and expect to begin allocating capital to disruptive companies exiting the private markets at favourable valuations. To be clear, in our view, we do not see opportunity in the SPAC trading-alone period itself but rather after a merger deal has been agreed and approved.

Cvent is a good example of such a company. It has a long heritage as a SaaS provider to the event industry and was taken private in 2016 at a valuation of USD 1.65 billion 13. Its return to the public markets via a SPAC is one of the more blue-chip exits to date.

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