InvestmentsAug 18 2017

Fund managers' thoughts turn to returns from robotics

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Fund managers' thoughts turn to returns from robotics

Japan is the market to focus on to profit from the increasing prevalence of robotics, according to a range of fund managers.

The use of robots in industrial manufacturing has reached a “tipping point”, with Japanese companies likely to benefit, according to Sophie Li, portfolio manager at First State Stewart Asia.

She said automation and robotics will be "the next industrial revolution".

Ms Li said while it took 30 years for the number of robots in manufacturing use to reach 1m in 2010, that number is expected to hit 1.9m by 2020.

Simon Edelsten, who runs the £72m Artemis Global Select fund, has recently embraced the investment case for robotics, after a period of scepticism.

He said: “Basic industrial process automation has been deployed since Henry Ford, including robots in many heavy manufacturing areas such as automotive. That is the past. The future seems to be systems which combine automation with computing - sometimes leading to a rise in production quality as the computer control 'learns' from mistakes.

"The most striking version of this has been surgical robotics where, in some specific operations, automated systems have better outcomes than human surgeons.”

Mr Edelsten said future growth is likely to come because robots are becoming cheaper to produce and “smarter”, so may improve product quality.

He said robots have evolved to the point where they can handle the sort of fine materials used to make smartphones, having previously been confined to producing items that use heavy materials, such as auto manufacturing.

Mr Edelsten said: “The best companies are, of course, in Japan and trade internationally, so prefer a weak yen - which they have not had. Recent results from one company showed orders nearly doubled year on year - led by Chinese demand.

"Such countries no longer want to offer cheap labour, they want to offer highly productive labour and that needs automation.Daifuku is one we are most interest in. It is a world leader in factory automation.”

The Artemis Global Select Fund has returned 66 per cent over the past five years, compared with 46 per cent for the average fund in the IA Global sector in the same time period.

Adrian Lowcock, investment director at Architas, said that while investor interest in robotics has picked up over the past year, his view is that the best investments in the sector can be accessed through investments in more generalist global equity or technology funds.