Robert Zeuthen, BNY Mellon IM
As technology development and environmental concerns change how people travel and commute, the mobility innovation theme is gaining greater attention among investors.
It represents the disruptive, transformational shift in how we use, power and control all forms of mobility, and it profoundly impacts businesses, governments and consumers by materially altering interactions.
In particular, the growth of mobility innovation has been driven by the growth and rapid adoption in relation to electric vehicles (EVs) globally, as well as the need for infrastructure to support it.
At the same time, there are other opportunities that stem from the EV trend.
“While electric vehicles are clearly spearheading green energy transition, there are opportunities up and down the value-chain as well as next-horizon investing opportunities that could expand the grid of cleaner energy sources, such as hydrogen, and move from ground to include the sky, such as drones and eVTOL aircraft,” said Robert Zeuthen, fund manager of BNY Mellon Mobility Innovation Fund, in an interview with FSA.
Nonetheless, the asset manager believes electrification, especially vehicle electrification, is a dominant sub-theme currently.
“Companies in this group are seeing solid fundamentals as the world invests in electric powertrains and grid infrastructure to promote more reliable and sustainable mobility,” said Zeuthen.
He noted that these companies offer attractive growth and valuations relative to the other sub-themes, and the growth in the industry has started to materialise with manufacturers launching plans for future models to be introduced over the next few years.
The thrift of the industry is also boosted by government efforts to cut emissions, such as clean air policies, energy security goals and cost of ownership, Zeuthen added.
“For automobile original equipment manufacturer to meet mandatory emissions requirements in countries such as China and Europe, electric vehicles will be a necessary part of their overall fleet,” he said.
“Additionally, consumers, especially millennials and Gen Z, are taking a more proactive approach and factoring in sustainability when making their next vehicle purchase.”
The BNY Mellon Mobility Innovation Fund is exposed to companies located worldwide that are focused on the mobility innovation theme, including connectivity, autonomous, sharing and electrification.
About 60% of the fund’s assets are invested in companies in the US, 6.4% in China and 6.1% in Japan.
The fund’s largest exposure is to the semiconductor industry, with 18.7% of its AUM invested in the sector, followed by electrical equipment with 17.8%.
“We are cognizant that semiconductor stocks are poised to see negative estimate revisions in coming quarters and sales growth may decline next year broadly for the industry. Industry lead times are beginning to contract in select categories and a loosening of supply may actually provide some relief for our equipment holdings where growth has been constrained,” said Zeuthen.
When compared with the MSCI AC World Index Mid Cap average, the fund posted a 48.74% cumulative return over three years, while the index reported a 28.78% return, according to FE Fundinfo. Meanwhile, the FE fundinfo sector reported a 23.96% return.
The fund is quite volatile over a three-year period, with volatility of 25.73% compared with the sector average of 18.19%.
BNY Mellon Mobility Innovation Fund vs index average vs sector average
BNY Mellon expects to see strong growth in the mobility innovation theme over the next decade even as global growth slows, given that governments around the world are pushing for more sustainable approaches to meet climate goals.
Meanwhile, the asset manager said it is looking for opportunities to establish new positions in power management and motion control.