Lingen, who spoke to FSA on a recent trip to Hong Kong, co-manages with Karen Kharmandarian the Pictet Robotics Fund, which has about $2.6bn in assets.
The fund holds about 50 companies out of an investment universe of 250 with a combined market capitalisation of $3trn.
Lingen looks at companies with at least 20% of revenues directly exposed to one of three themes: enabling technologies (such as sensors that help cars with artificial intelligence functionality), industrial automation and consumer services applications (such as robotic vacuum cleaners or surgical robots in the healthcare industry).
Those involved in military business are excluded.
Enabling technologies account for 45.4% of the fund’s portfolio, followed by industrial automation (31.4%), service and consumer application (17.6%) and cash (5.7%) as of end-December, according to the fund factsheet.
The regions that represent the largest chunk of the portfolio are the US (51.9%), Europe ex-UK (22%) and Japan (16.1%), according to its December fund factsheet.
China represents only 1.8% of the fund. China is becoming competitive in developing its own robotics technology. However, he is concerned about valuations.
Risks in capex
Robotics investment, however, involves volatility stemming from both cyclicality and capital equipment spending, which is linked to a country’s economic health.
About 20% of the portfolio is invested in semiconductor companies, particularly in the US, which is a cyclical industry. But Lingen believes semiconductor companies provide more stability compared to software companies, particularly start-ups. He also finds their valuations attractive.
Besides semiconductor companies, robotics manufacturers that are in the industrial sector, such as robots used in automated factory lines, are also at risk due to capital expenditure cycles.
Around 25% of the portfolio is invested in industrial automation. Investors should therefore expect short-term volatility, according to Lingen.
“Any economic weakness would have an impact on the portfolio,” he said, as the portfolio is exposed to industrials. However, he remains optimistic about global GDP growth in 2017.
One-year performance to end-December 2016 of the Pictet Robotics Fund versus the broader market, according to data from FE Analytics. The fund was affected by the Brexit vote in June but has since recovered and consistently outperformed the market.
In Singapore and Hong Kong, the fund is only available to professional investors, which include institutions and high-net-worth individuals. It was first launched in October 2015 in Europe.