Best In Class  

Best in class: Smith & Williamson Artificial Intelligence

Best in class: Smith & Williamson Artificial Intelligence

Best in class: Smith & Williamson Artificial Intelligence

I wonder how many of us were familiar with the idea of ‘Nudge Theory’ until recently.

Developed by Richard Thaler and political scientist Cass Sunstein, it uses insight about our mental processes to change our behaviour through coaxing and assertion – rather than force.

Think of putting a bowl of fruit in clear sight of your child every day instead of pestering them to eat a piece.

The use of ‘nudging’ by the UK Government was criticised when the Coronavirus first started to spread on these shores.

The government opted to ask people to wash their hands - to slow the spread of the disease, rather than closing schools and banning large gatherings like many other countries.

How things have changed in the past month:

“The Coronavirus epidemic, and the extraordinary circumstances in which we are now asked to live our lives, has not so much nudged as hurled populations headlong into behavioural change of a magnitude perhaps never previously seen.”

That’s the view of this week’s best in class fund managers Chris Ford and Tim Day, who have managed the Smith & Williamson Artificial Intelligence fund since its launch in June 2017.

Many of the world’s largest companies are now using AI, as they target sustained long-term growth as technology transforms their respective industries, and a report from PwC estimates that AI will add $15.7trn to the global economy in the next decade*.

Clearly this pandemic has made changes to consumer behaviour and the benefits to a fund like this are clear – you only have to look at some of its holdings to see that.

Netflix is a perfect example, the pandemic only pushes people towards the subscription service, which charges £5.99 a month for a vast array of content.

Netflix downloads in Asia saw 28 per cent year-on-year growth in February 2020. I would not be surprised if we saw a similar story in other parts of the world.

Online supermarket Ocado and video games company Activision Blizzard are also holdings which have the benefit of operating and building market share during this period of social distancing.

Crucially, they are likely to be significantly more popular at the other end, once the lockdown measures are eased.

The managers believe that for these companies it is the longer-term opportunity that is important, adding that: “For companies whose products and services that forge a reputation for resilience in the fire of the coronavirus outbreak, the key benefit will be to emerge stronger, more profitable, and more embedded in our everyday lives.”

The process of this fund is powered by an AI tool called Orbit, which is designed to identify key 'markers' of companies using AI within their business models.

It scans thousands of company documents (in just a few minutes) using character recognition, and applying natural language processing, to identify key words and relevant phrases that indicate the use of AI in the accounts.