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To Future-Proof Your Portfolio in 2018, Investors Should Look to Robotics and AI

Written by: Jeremie Capron, CEO, ROBO Global EMEA

2017 has given investors a thrilling ride. Of course, heading into the New Year, the market highs have all of us wondering how much life is left in what has been one of the longest bull markets in history. For investors seeking a way to future-proof your portfolio into 2018, look no further than Robotics, Automation, and Artificial intelligence (RAAI).

Indeed, RAAI may be one of the most important investment opportunities of our generation. In the first 11 months of 2017, the ROBO Global Robotics & Automation Index—the leading stock index created in 2013 to track the robotics and automation revolution for investors—returned an incredible 47%, significantly outperforming broad equity market indices.

Perhaps even more impressive is that the multi-decade transition to advanced robotics is still in its infancy—and the ingredients for a major breakthrough are already in place. Costs are rapidly declining across key enabling technologies such as computing, sensing, and communication. There has been an explosion in performance capabilities that dramatically expand the scope of RAAI and how it is applied in nearly every industry. At the same time, the world is generating an almost unimaginable quantity of the fuel that powers artificial intelligence: Big Data. And that pace is growing at a frenetic pace of billions of gigabytes every day. RAAI is poised to explode, and it promises to be even more transformative to our society and how we function than personal computers, the Internet, mobile devices, and big data before it.

It is now predicted that RAAI’s economic impact will be measured in the trillions of dollars. Andrew Ng, then Chief Scientist of Baidu and Adjunct Professor at Stanford who led the development of its Massive Open Online Course platform, has called Artificial Intelligence “the new electricity.” Acclaimed futurist Ray Kurzweil has said that, “Artificial intelligence will reach human levels by around 2029,” and that by 2045 “we will have multiplied the intelligence, the human biological machine intelligence of our civilization a billion-fold.” That’s quite a revolution, and companies in every industry are rushing to leverage and build on all that RAAI has to offer. In the race to “disrupt or to be disrupted,” mergers and acquisitions are on fire. More than 50 robotics and automation companies were acquired in 2016 for a total of more than $20B, and the pace accelerated in 2017. Robotics startups also saw a record year in 2016, with deals up by nearly 20% to reach more than 1701, and totaling $3B since 2012, excluding pure software companies and driverless cars.

Related: Investing in Robotics? Follow These 5 Simple Rules

While the opportunity for growth is clear, investments in RAAI are still in the early stages. US investors have currently invested about $3B into funds that are focused on RAAI—less than a third of the $10B that Japanese and European investors have allocated to dedicated funds. And those numbers are expected to grow rapidly in the coming year. The question isn’t if investing in RAAI makes sense. The question is how.

While there are now a handful of funds that offer the opportunity to invest in the RAAI revolution directly, it’s clear that not all funds are created equally. Funds that invest in a short list of large-cap stocks in the sector have seen returns that are correlated with the general market highs, but in today’s dynamic environment it is is it very possible that the largest players will change nearly as quickly as the technologies themselves. As well, because of their reliance on only the largest players, these funds are likely to maintain their correlation with the market when values begin to tumble. A more prudent option is a fund that offers broad exposure to the global value chain by tracking the ROBO Global Robotics & Automation Index. Based on research and analysis by some of today’s leading experts and academics in RAAI, the Index includes not only large-cap participants, but also providers of key enabling technologies (sensing, computing, and actuation) as well as providers of applications that deliver capabilities that are applied across multiple industries (factory automation, surgical robotics, food and agriculture, 3D printing, logistics automation, and more).

Across industries and around the globe, companies are revising and rethinking their own strategies to cement their futures in a world that is dictated by robotics, automation, and artificial intelligence. The financial markets have already recognized this shift and have begun to reward those who are placing their bets on the future. For investors who are seeking a strategy to capture those rewards—and truly future-proof their portfolios—the time is now to invest in all that RAAI has to offer. 

Don't miss the full text of this article and much more in Jason Schenker's The Robot and Automation Almanac - 2018: The Futurist Institute, coming January 5. Pre-order now on Amazon.

1 Source: CB Insights

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