On Wednesday lunchtime, Pictet Asset Management held a presentation at the Hotel Place d'Armes in Luxembourg city centre to outline their investment strategy.
The Pictet-Security fund invests in innovations and solutions for a better world. Since its launch in 2006, it has largely outperformed global equity markets. They are convinced that the security sector will continue to outpace the global economy, driven by major long term trends such as technological innovation, urbanisation in the emerging countries and increased regulation in the globalised world confronted with global threats.
Frédéric Dupraz, senior fund manager of Pictet-Security reviewed the fund’s unique investment approach, its performance and positioning, and shared his firm convictions on the security theme. He explained that it is an active fund; they have developed a framework for investing over trends that change the world.
The 5 mega-trends they have selected include Demographic development, Globalisation (underdeveloped markets that need development), Economic Growth (also growing when economies in stagnation), Acceleration & Complexity, and Technology Development.
Without realising it we are all everyday consumers of security solutions as their influence extends to many consumer and other products. He presented such instances by a day timeline, from using gas first thing in the morning, then baby bottles, use of passive solutions in cars and other forms of transportation, etc...
In terms of innovation, he stressed that in a number of years there will be 50 billion devises connected to the Internet; with this, cyber-security threats increase and such IT security budgets are currently increasing by around 20%. He gave the case-study example of Ingenico, a payment solution provider for electronic payment transactions.
He also emphasised the current trend of urbanisation, with an additional 20% of the population moving to live and work in cities, with 66% of the world's population expected to be living in cities by 2050. In this case, he gave the example of Assa Abloy, a self-help initiative with a manufacturing footprint and value-enhancing acquisitions strategy.
On regulation, the testing, inspection and certification industry is seeing a huge increase. He referred to the fact that more is spent today for animal food testing than for humans... In this case he gave the example he mentioned Eurofins Scientific, a global leader in bioanalytical testing in the food, environment and pharmaceutical sectors. On major Mergers & Acquisition transactions, they continue to invest in this fragmented industry.
Why invest in security? He emphasised the issues of innovation, urbanisation and regulation which lead to a continued growth of 7-9%. Strong financials are thanks to high entry barriers. Also, M&A opportunities mean a search for growth.
He explained that they do not invest in the defence industry and ensures that no company in their portfolio has such exposure. Their broad investment themes include physical security products, IT security products and security services; such companies help maintain the integrity, health, safety and protection of individuals, companies and governments. New applications and evolutions are driving growth in these three areas.
He also explained the investment process which starts out by identifying circa 350 companies and which is filtered down to 60-75 holdings in total. There is a focus on high growth and low accessibility niches. For the future, he sees opportunities to include cloud computing and cyber security (14%), secure electronic payment (17%), environmental and food safety (13%), occupational safety (7%), infrastructure safety (9%) and residential and non-residential construction (13%).
Photo by Geoff Thompson: Frédéric Dupraz, Pictet Asset Management
