This autumn 2021 In Assessment: ROBO World Innovation Indices



The Robotics & Automation Index (ROBO) weathered the sell-off in lots of disruptive expertise shares: It outperformed international equities and rose 9% in This autumn, to shut the 12 months 2021 up 16%. The Synthetic Intelligence Index (THNQ) was up 10% in 2021, and the Healthcare Know-how & Innovation Index (HTEC) was flat, after each indices rose greater than 66% in 2020. Whereas traders debate the near-term progress and inflation outlook, we stay centered on the innovators and market leaders driving these expertise traits. On this report, we talk about key developments and large movers throughout our innovation portfolios.

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Q4 2021 Performance Sheet

Webinar Transcript:

Jeremie Capron:

All proper. Good morning, everyone, and welcome to ROBO World’s January 2022 Investor Name. My identify is Jeremie Capron. I am the director of analysis. I am speaking to you from New York. And with me on the decision, my colleagues and analysts from the analysis group, Nina Deka and Zeno Mercer. So we lately revealed our annual traits analysis report, which you could find on our web site. It is at And at the moment we’re very excited to current a number of the key expertise traits that we’re watching on this new 12 months and the way they relate to our three innovation index portfolios. That is ROBO, the robotics and automation index, HTEC, H-T-E-C. That is the healthcare expertise and innovation index. And THNQ, that is T-H-N-Q, the unreal intelligence index. And we might be taking your questions. So really feel at no cost to sort them into the Q and a field.

Let me begin with just a few remarks available on the market and our outlook for this 12 months. Our view a few 12 months in the past that 2021 can be a increase 12 months that has largely performed out. In actual fact, the worldwide financial rebound has continued. There’s a variety of momentum regardless of the renewed COVID-19 waves and flare ups within the US and the remainder of the world with new variants, however I feel extra importantly for traders in expertise, the pandemic has been a really robust catalyst for the digital of the financial system and our view that robotics AI, as a subsequent expertise revolution, this view has performed out at an accelerated tempo over the previous two years. So give it some thought. We have all needed to make adjustments to our lives. Our work lives, our private lives when it comes to how we work, how we store, how we examine, how we entertain ourselves. And most of those adjustments they have been about adopting extra digital expertise and extra automation. And from the standpoint of companies, corporations have additionally needed to adapt and the place have they been investing? They’re digitizing, they’re deploying automation and AI at a file tempo. And proper now the bottleneck is the scarcity of staff, which we will see throughout a lot of the Western world in China as properly.

Within the US alone, we have seen the variety of unemployed staff again to the pre-COVID ranges of simply round six million. And within the meantime, we have seen job openings which can be searched to greater than 11 million. That is an almost 50% improve from the pre-COVID ranges. Regardless of the trigger is, the rapid reply from corporations is productiveness. And we consider that this can proceed to offer a powerful tail finish for automation and AI when it comes to the demand for options round that. After which ’21 was a 12 months of shortages. Not solely of staff, but additionally semiconductors. We have seen important disruptions in provide chains. So primarily you may have a constraint provide aspect and on the similar time, you may have very robust client demand. And so inflation has turn out to be a priority. We have seen inflation reaching multi-decade highs and that has triggered considerations round curiosity for charges.

And previously few months, traders have been apprehensive about doable hit to financial progress consequently from tighter financial circumstances, tighter fiscal coverage. And so we noticed very brutal transfer in a number of the most speculative areas of the fairness market in current month. We have seen many shares which have had extraordinary returns within the restoration from the COVID lows, giving again lots, if not all of their video games. And I feel this contains many so-called disruptive expertise shares. So when you have a look at the NASDAQ, the NASDAQ is down about 8% from the excessive, however beneath the floor, there’s greater than a 3rd of the shares within the NASDAQ index which can be down greater than 50%. They have been chopping half.

And I need to transfer to the following slide right here. The excellent news is that our innovation portfolios aren’t overly uncovered to such lengthy length shares. And by lengthy length, what I imply is corporations which can be loss making, however anticipated to make important earnings a number of years out into the longer term. And in reality, one of many key pillars of our funding technique right here at ROBO World is diversification. And so whereas we take the long-term view and we construct index portfolios with corporations which can be positioned to learn from the expertise revolution within the long-term, the index building methodology is predicated on a really disciplined system. It is a self-discipline scoring system to pick the expertise and market leaders and in addition self-discipline weighting system that avoids focus. And focus might be very painful as we now have seen in current month. So once we have a look at our index returns right here on the desk, we’re fairly happy with the efficiency of ROBO, and THNQ, and HTEC, and their resilience on this difficult market. In actual fact, when you have a look at ROBO within the fourth quarter, the ultimate quarter of 2021, ROBO was up slightly below 9%. It closed the 12 months up greater than 16%. And over the previous three years, we’re 30% annualized returns. So fairly passable right here. And you may see on this secure that the three analysis pushed methods have largely outperformed international equities over the previous three and 5 years.

Okay. Now let’s speak about robotics and the traits that we’re watching. After which I am going to move it on to my colleagues to debate healthcare expertise and AI. However first, I need to present this long-term efficiency chart of the index. And once more, that is an index that is greater than 84 corporations proper now. They’re the perfect in school robotics and automation corporations from all world wide. And you may see right here the outperformance over time, which can be a reflection of this ongoing expertise revolution, the exponential progress of automation and autonomous programs in just about each sector of the financial system. On this subsequent slide, you’ll be able to see that’s what we seize with index. The core enabling applied sciences on the left aspect like sensing, and computing, and actuation. After which on the appropriate hand aspect, probably the most promising purposes. And that covers manufacturing unit automation to eCommerce logistics. You may see healthcare, meals, and agriculture, and so forth.

So when it comes to particular traits that we’re taking note of this 12 months, I want to begin with robots coming to avoid wasting the availability chain. Everyone knows concerning the pandemic associated provide chain disruptions, however one other actual essential issue right here is the dramatic rise in eCommerce volumes. And there is ever shorter supply instances that buyers now anticipate. And that is pushed explosive demand for logistics and warehouse automation. Orders have been exceeding provide capability for materials dealing with gear, autonomous cellular robots, the monitor and hint expertise inside the availability chain, the storage system, the retrieval programs.

We predict that the logistics and warehouse automation market exceeded $70 billion final 12 months. And we predict it would develop to greater than 105 billion by 2025. So a number of the main beneficiaries in our portfolios are corporations like Daifuku in Japan, Zebra Applied sciences right here within the US, GXO Logistics that lately went public. It has very robust presence within the UK. We’re AutoStore additionally lately IPOed firm out of Norway, Cardex is in Switzerland. So you’ll be able to see the breadth right here of corporations within the portfolio. And we predict that basically from a expertise perspective, it is the developments in laptop imaginative and prescient, in machine intelligence, in supplies, in sensors which have actually enabled robotics to make a considerable impression on the planet of logistics. Right this moment, robotic selecting is changing into a actuality and we have seen robotic selecting speeds now exceeding 100 peaks an hour. And that compares to people efficiency simply round 60 to 80 peaks an hour. And so automation right here is relieving staff from checks which can be frankly boring and exhausting and more and more tough to search out staff for it.

And transferring on, I additionally need to spotlight manufacturing unit automation the place we anticipate to see a surge this 12 months in 2022. In actual fact, the world’s main robotic corporations like FANUC, and Yaskawa, and ABB, and KUKA, they’re all ending the 12 months with very inflated order backlogs. They’ve a powerful visibility into demand for 2022, and we anticipate that the put in base of business robots world wide might be simply round 3.7 million. 3.7 million robots by the tip of the 12 months. And but that will nonetheless characterize lower than 1% of the variety of manufacturing staff world wide factories.

So one of many greatest areas of focus proper now could be collaborative robots. We name them cobots they usually can work seamlessly with people. And there is an instance of that right here on the image within the higher proper nook. Cobots are at the moment lower than 5% of the market, however we anticipate the phase to develop by greater than 35% per 12 months. And meaning a market that might attain 15 billion by 2028. And the market chief right here is Teradyne. And Teradyne occurs to be the most effective performing shares. Within the closing quarter of 2021, the inventory was up 50%. Teradyne is actually a semiconductor testing corporations traditionally. Again in 2015, they acquired Common Robotic and made it the highest participant in collaborative robots. They’ve very robust options for the availability chain and warehouse automation. And the primary 9 months of the 12 months, Teradyne gross sales in Common Robotic, had been greater than 50% 12 months over 12 months.

I feel the third essential pattern I need to spotlight right here when it comes to robotics is the rise of autonomous autos. And right here I am speaking concerning the lengthy haul, but additionally the final mile supply. The applied sciences which can be making autonomous autos doable are converging and the price are falling very quickly. You consider sensors, take into consideration AI and the compute energy and communication with 5G now obtainable. That is driving down the price of items. We predict autonomous autos are very promising when it comes to potential to hurry up deliveries and improve vitality effectivity and decrease emissions. So at the moment there’s only a small variety of autonomous automobiles and vehicles world wide. There’s many extra autonomous cellular robots inside factories and warehouses, however on the roads, we’re simply getting began. And in reality, Waymo was the primary firm within the US to launch a totally autonomous taxi service. And it launched in Arizona, however nonetheless had a driver up within the entrance seat. Now, Cruz has simply introduced that it’ll turn out to be the primary firm within the US to have a full autonomous service with no driver. In order that’s changing into a actuality. We’re corporations like Tesla after all, but additionally Luminar, Nvidia, and Qualcomm that present the mandatory expertise to make these programs doable. So Luminar is in lidars, Nvidia is in computing after all, Qualcomm within the umbrella as properly. Umbrella that has video processing chips and make some nice headway within the auto trade.

Now, China can be main the best way there. And we lately heard from Alibaba that they accomplished the one millionth eCommerce supply utilizing autonomous supply robots. And Baidu additionally obtained an approval in Beijing to launch a robotaxi service. So we’re seeing autonomous autos on the roads. We will see extra of them. The suppliers of the important thing applied sciences are going to learn. We’re additionally seeing autonomous autos on the water. Cargo ships. And lately in Amsterdam, we noticed a full autonomous water taxi service begin. And likewise indoor whereas indoor drones piloting round that we predict that is an infinite market alternative. So I feel with that, I’ll cease right here and move it on to my colleague, Nina. I would like to ask Nina to speak about healthcare applied sciences.


Nina Deka:

Proper. Thanks, Jeremie. And thanks everybody for becoming a member of the webinar at the moment. We actually recognize your curiosity in ROBO World. So HTEC is our healthcare expertise and innovation index. We focus solely on healthcare tech. And it is a portfolio of corporations which can be mainly offering traders with publicity to all of the disruption that is taking place in healthcare, the excessive progress corporations over the following 5 to 10 years. So a extremely thrilling time to be concerned on this house. Though this chart could not essentially point out so within the shorter time period on condition that within the full 12 months 2021, the efficiency … the index returned about 0.4%, however when you have a look at the long term intervals, for instance, over a 3 12 months interval, a again check would present that the index has returned over 30%.

So it is a nice long-term alternative, but additionally a extremely fascinating time to get entangled in case you are not but concerned or trying so as to add positions as a result of proper now the index is buying and selling at about 6.4 instances ahead EV gross sales, which is a reasonably discounted a number of given the place it has been traditionally. For instance, final 12 months, it was extra within the seven instances vary. So a extremely thrilling time to get in there. And let me dig in a bit bit about what occurred final 12 months. In order we’re all conscious, 2021, a key theme that resonated all year long was simply uncertainty. Not realizing what was going to occur with the financial system, with the pandemic. There was a degree the place folks thought that we had been popping out of it and that 2022 be normalized after which Delta occurred. And consequently, largely of the Delta variant when it comes to healthcare, procedural volumes had been impacted. Individuals who had been ready to get their knees changed for instance, as soon as once more put that on maintain. And so there was already a backlog of people that doubtlessly would’ve had procedures in 2020 which will have gotten them in 2021 that obtained additional delayed. So this impacted a variety of healthcare corporations.

Along with that, there’s the brand new healthcare employee disaster, which is healthcare employee shortages. Through the pandemic, over 100,000 healthcare staff lives have been misplaced globally. And within the US alone, over half one million folks have left their jobs resulting from numerous pandemic associated causes since February of 2020. So all of us already had a healthcare employee staffing scarcity that was rising. It’s going to proceed to develop the hole between folks coming into the healthcare employee workforce. It appears to be rising as a result of extra individuals are retiring out than individuals are coming in. In the meantime, individuals are residing longer. So the demand for healthcare staff within the subsequent 10 years just isn’t going to be ample for the variety of folks say over age 85 who’re residing longer to obtain the care that they want. That dynamic was accelerated within the final 12 months or two as a result of pandemic.

So now as we stay up for 2022, we’re interested by what are some areas which can be actually going to assist this problem, which is really a disaster. When folks speak about healthcare capability, it is not about variety of beds. There are aren’t sufficient beds obtainable. That is not the problem. That is a 2020 downside. In 2021 and now bleeding into 2022 with the Omicron variant, there’s not sufficient healthcare staff to take care of the quantity of people that want the care. So if we zoom in actually fast to This autumn, HTEC was down 4% and it was to those indicators that I simply talked about. The Delta variant, procedural volumes being lowered, additionally considerations round inflation and or rising rates of interest. So all these items have impacted tech. And when issues impression tech after which issues additionally impression healthcare, HTEC will see each the confluence of each of those components. Like I stated, nice entry level for individuals who have an interest.

I do need to spotlight two corporations that basically had a terrific efficiency in This autumn of final 12 months. Vocera was up 34%. This can be a firm that gives a palms free wearable gadget that’s voice operated. As you’ll be able to see, it is this badge that is worn on the clothes of the 2 healthcare staff. This firm obtained a variety of consideration in the course of the pandemic as a result of it enabled folks to speak with their colleagues, their different healthcare staff exterior of the affected person’s isolation room with out having to go away the room, take off the PPE, come again, placed on new PPE. So Vocera actually helps clean effectivity and that is only one facet of what they do. In addition they supply software program that helps combine all of the medical units within the hospital. And on that well being handhold gadget, a doctor or a nurse can get all of the updates with out having to go to the affected person bedside.

So given their capacity to combine and have this underlying software program that type of ties collectively all the units within the hospital. We not solely noticed this as a lovely funding alternative, Vocera is a member of not simply HTEC, but additionally of ROBO. It was simply introduced just a few weeks in the past that Striker, one other firm in HTEC, plans to amass Vocera. And it is a fairly engaging valuation right here. It was about 10 instances subsequent 12 months’s gross sales, which is a premium given, but it surely was warranted given the sophistication of this firm’s analytics and integration capabilities. We anticipate to see the funding traits towards healthcare, information analytics, and integration capabilities. That is simply early days. Healthcare simply went digital within the final 10 years. There may be nonetheless a serious alternative for lots of disruption right here. So this is only one instance of why, though healthcare tech seems prefer it took a bit little bit of a backseat, there’s nonetheless a lot right here that’s going to be ahead a variety of upside when it comes to valuation and a number of enlargement.

One other thrilling firm in This autumn is Codexis. Codexis returned 34% within the quarter. And so they reported a rise 242% income within the earlier quarter resulting from 29 million in gross sales from their partnership with Pfizer. It has been extensively reported that Pfizer has an antiviral treatment for coronavirus for COVID 19. And so Codexis is an organization within the HTEC index that Pfizer partnered with to offer the proprietary enzyme used to make the drug. So I need to spotlight right here that this is only one firm of many within the index which can be enabling a variety of expertise and healthcare to maneuver ahead. These enabling corporations are ones that not lots of people have heard about. There’s different examples of it like Moderna and J&J each partnered with Catalent to get their vaccines out the door. And Lonza. Catalent, Lonza, Codexis are all examples of corporations which can be third occasion producers of medicine. And so they present very subtle degree of producing capabilities. Take into consideration mRNA. No person had ever heard about it, properly, exterior of the science neighborhood till final 12 months or the 12 months earlier than. And now it is a multi-billion greenback enterprise. And it requires a degree of subtle to have the ability to manufacture that at scale, and Catalent rose to that event.

So these are simply examples of while you see one thing actually cool taking place in healthcare within the information, chances are high these corporations in all probability needed to companion with different corporations. And so there’s a variety of alternative for funding upside right here. And so actually that is the place when you’re focused on capturing all that upside potential, a diversified portfolio is perhaps a superb technique for you. And so that is what HTEC presents. In order we glance ahead now into 2022, I discussed that what we will be-





Nina Deka:

… maintaining a tally of.



Apologies. Can I interrupt you simply actually fast? As a result of we now have a query to clarify the massive underperformance of HTEC in comparison with international healthcare index. So earlier than you progress into the ahead trying, might you type of handle that basically fast?


Nina Deka:

Oh, completely. Thanks for the query, Erin. So primarily, as I discussed, when healthcare and tech take successful, that can impression healthcare HTEC a bit bit greater than the worldwide healthcare index. So when you had been to take a look at … And truly we now have a slide that describes this space with the horizontal bars. Should you had been to take a look at the worldwide healthcare indices, the massive ones like S&P, what you will discover is that they are much extra closely weighed in giant cap prescription drugs and hospitals, medical health insurance corporations. The rationale why is as a result of these portfolios are cap pushed. They’re comprised largely of enormous cap corporations. And the biggest cap corporations in healthcare are giant cap pharma and medical health insurance corporations. And that could be a very completely different funding technique.

We’ve lower than one-fifth overlap with these varieties of portfolios. So throughout a time of uncertainty when individuals are involved about issues like inflation or rising rates of interest, they have an inclination emigrate in the direction of a number of the extra worth funding alternatives corporations with rising dividends and firms with constructive earnings, constructive cashflow whereas strong funding alternatives are typically rising within the single digits. And like I stated, that is a really completely different funding alternative. Should you have a look at the inexperienced bar, the inexperienced horizontal bar, that is the HTEC. In order you’ll be able to see, HTEC is a bit bit extra … very way more diversified throughout these different areas that we consider characterize all that technological progress and disruption that I used to be simply describing to you. So corporations which can be serving to to fabricate mRNA, corporations which can be serving to to combine all of the medical units in a hospital, 3D printing, surgical robotics, genomics, diagnostics. Should you look in search of extra diversified portfolio that is going to cowl these elements of healthcare, like I stated, that is what HTEC has extra comprised of. Nonetheless, in an surroundings the place folks had been extra involved about excessive progress tech names corporations which may not have constructive earnings, however anticipate you within the subsequent couple of years, these shares over the past 12 months mainly took successful. And so HTEC noticed the confluence of that.

After which I discussed earlier the extent of pleasure we now have round corporations offering information, that is information analytics and AI. There may be a variety of dysfunction taking place in healthcare proper now. So when you had been to consider why ought to I spend money on healthcare innovation proper now? I feel one cause to not make investments is when you suppose healthcare is ok the best way it’s. If there isn’t any healthcare employee scarcity, if all the things’s high-quality, if there is no treatment associated errors, all the things’s going easily, then there’s not a variety of room for disruption, however we all know that that is not the case. And so a technique that we’re going to have the ability to clear up all these issues is thru information analytics and additional integration.

One other actually fascinating firm is known as Well being Catalyst within the HTEC portfolio. That is one other information analytics firm that is built-in with tons of of software program packages all through a hospital system. And so they can analyze a inhabitants in an space and supply information to the hospital and say, “Look, we see an space the place individuals are vulnerable to being hospitalized due to their excessive threat well being state of affairs.” Well being catalyst will assist seek the advice of with the hospital to offer a plan to be proactive and go after the excessive threat inhabitants. And in doing so in a single specific hospital, they had been in a position to assist save $32 million and decrease affected person admissions as a result of simply from figuring out forward of time utilizing analytics and AI to see which of the inhabitants they’ll serve and assist hold wholesome and stop the sickness to start with.

One other actually thrilling space that we’re following as I discussed is robotics. After I speak about how there is a healthcare employee scarcity, one of many ways in which we’re going to have the ability to strategy this and transfer ahead is thru automation and firms offering healthcare robotics proper now are actually on fireplace. There’s one within the HTEC and ROBO portfolio referred to as Omnicell. Omnicell offers robots to pharmacists and to hospitals to assist automate the pharmacy course of. If you concentrate on pharmacies at the moment, you’ve got obtained a pharmacist placing tablets in bottles after which doing a ton of administrative work. And but 90% of pharmacists point out in a survey they cannot discover sufficient assist to do all of the work that is wanted. In the meantime, treatment error is the third main reason behind loss of life in the US. So we have got a difficulty right here and an enormous alternative for automation. And Omnicell is a extremely fascinating firm proper now, and they’re additionally rising and did very properly final 12 months.

After which one other space we’re actually enthusiastic about is spatial biology. So that is one thing that we predict goes to be the following frontier in genomic science. Subsequent gen sequencing was a extremely large deal within the mid 2000s onward. We noticed an enormous inflection level there after they began being manufactured and we consider that that is going to be taking place, spatial biology. We anticipate to hit an inflection level equally within the subsequent 12 months. And in order for you extra particulars on spatial biology, completely satisfied to speak about that additional. And we even have particulars about that within the report. I am going to simply say in a short time that what spatial biology does is it permits you to have a snapshot of what is going on on, for instance, contained in the physique, like inside a tumor at extra element than when you had been to simply merely sequence … do the gene sequencing.

Should you had been to consider a map, image a map with no streets and no addresses. What spatial biology does is it mainly places the addresses, and the places, and the constructing numbers on the pattern. And so if you concentrate on that in a tissue pattern, it is providing you with simply much more element than you’ll’ve in any other case had. And with this, individuals are going to have the ability to develop higher therapies and in addition diagnose most cancers higher and different sicknesses. With that, I’ll pause and really move it over to Zeno who’s going to speak to you about THNQ, our AI portfolio.


Zeno Mercer:

Thanks, Nina, for overlaying HTEC. Hey, everybody. Right this moment I’ll be overlaying our THNQ index. That is T-H-N-Q. And inside THNQ, we primarily try to seize the universe of synthetic intelligence from software to infrastructure from the bottom up. So throughout purposes, we have got cloud supplier, community safety, semiconductor. So these are the platforms which can be … and {hardware} which can be offering the manufacturers for the purposes that we now take without any consideration primarily to even work collectively. And on the applying aspect, we see thrilling corporations throughout client dealing with eCommerce particularly more and more within the final 12 months healthcare and enterprise processes is we see cloud adoption throughout corporations. A variety of it induced from the COVID pandemic. And moreover, we additionally see manufacturing unit automation. So the suppose index had a … we’ll admit it had a tough quarter for the This autumn. It was up 2.39% and up 26% on an annualized base since inception. So there was a mixture of components that contributed to this efficiency. And a few of it being simply fears round tapering and the rate of interest surroundings impacting a number of the greater progress shares. However that being stated, we’re seeing the demand for AI and adoption from the community degree, from the applying degree has by no means been greater.

So we have got information coming in from autonomous autos, augmented actuality, all these new platforms which can be being deployed in the true world truly with actual enterprise features. We have rising the price and vitality. There is a large demand for sustaining vitality prices, each on the information heart degree and micro gadget degree, that might be laptops to large information facilities offering AI for drug discovery. After which we have got the financial advantages. That it is one factor to contemplate. The AI is altering each trade. There is not a call made at a Fortune 500 firm now that is not pushed now with information and evaluation. After which moreover, that’s getting down into the merchandise which can be being deployed to prospects, each enterprise is and client. Actual fast. May you go to the purposes and infrastructure web page? Yeah.

So I simply need to spotlight additional on efficiency. So Semiconductor community safety had a terrific quarter. Nvidia and A&D each noticed barely over 40% inventory returns. There have been a variety of considerations across the capacity of those corporations to ship. And a few 12 months in the past, everybody was type of involved, will they be capable of sustain demand? Will they’ve provide chain points that forestall them from earning money? And the reply is sure. They delivered on all of the above and demand has by no means been greater as elevated purposes and firms preparing for 2022 and past are using these platforms. Healthcare expertise corporations and large information analytics, as we already mentioned, noticed a bit little bit of a laggard and huge deployments noticed some pushback. As soon as once more, that is within the 2022. So this impacted. These firm just isn’t semiconductor. After which lastly, excessive progress FinTech, which is a portfolio, part of our portfolio that we’ll speak about a bit additional on, was hit laborious as comparable considerations round inflation and rising rates of interest. However in the long term outlook, we see large continued adoption right here.

Now onto the corporate spotlight right here, Arista networks led by CEO, Jayshree Ullal, is a cloud networking supplier that’s powering giant information facilities from Microsoft, Google, Amazon. And primarily they supply these networking switches that enable them to speak and run sooner at extra vitality environment friendly. These information facilities eat a variety of energy, lot of compute. This can be a platform that will not be within the information for client product or something. They’re crucial, very highly effective. As I discussed, it was as much as 67%. It is a robust cloud surroundings. And so they raised their expectations to 30% and progress in 2022 even with continued provide chain points. So as soon as that subsides, you are going to see much more tailwinds there. After which New Relic, an organization I am certain most of you’re in all probability not accustomed to as a result of it is largely builders and cybersecurity specialists using this, but it surely offers full stack evaluation for each the infrastructure and software, which is essential as a result of a variety of gamers on the market simply have a look at one or not the opposite, and you actually require each of them working on the similar time to have the ability to function. Corporations like Uber. Simply any firm on the market that depends on large information units and realtime evaluation and ideas wants the sort of evaluation.

Take into consideration how your automotive runs. That is only a single surroundings with sensors. We’re not even speaking about autonomous autos right here. It wants to grasp how the oil, the gasoline and all these items are working. This mainly offers that, but it surely goes past that for a lot larger purposes. One of many causes for his or her large progress within the fourth quarter was they not solely simply beat expectations, however additionally they introduced that they scored a $3.5 billion new buyer, which is among the largest ever. And so they introduced two new merchandise that ought to improve the acceleration. And now I’ll cowl some traits that we’re enthusiastic about going ahead in 2022 and past. So AI machine studying driving the multi-cloud adoption. So what does that imply? As I discussed, whereas front-end purposes get a variety of the eye, multi-cloud environments are that center and again layer that empower this transition to the digital world. The aim is to make these interactions as seamless and dependable as doable, regardless of the situation throughout autonomous autos, the metaverse, any autonomous. So if the rising tide is the demand for these companies, then the water actually, the ballot is … that is enabling that is the multi-cloud networking environments. So in the end what you need to take away from that is the flexibility to securely share information and retailer information throughout completely different platforms, after which analyze it with completely different companies is paramount as we get into more and more complicated eventualities.

Gartner truly expects the worldwide cloud market to develop to 402 billion in 2022, which is 35% greater from 2021. So we’re seeing large progress spend right here. And index numbers akin to JFrog, Arista Networks which I simply talked about, MongoDB, and CloudFlare massively profit from this pattern.

Subsequent subject and pattern that I need to cowl is subsequent era banking. So banking and finance, as we all know, is remodeling. Applied sciences throughout blockchain, digital belongings, using expertise akin to voice recognition, higher identification, and cybersecurity are serving to automate each backend and client expertise processes. So that is going to offer a large transformation to banking companies and eradicate some overhead, but it surely’s actually doable resulting from machine studying enabling extra correct predictions threat administration, enabling higher client interactions. So that is going to cowl insurance coverage, fraud, mortgages, cashless funds, digital insurance coverage. There’s actually not an space this is not going to the touch finally. And this is not simply theoretical. These are being deployed and utilized proper now out with each non-public and publicly traded corporations, akin to THNQ index members, Lemonade, Upstart, Truthful Isaac, and Block, which when you aren’t acquainted it’s Sq. simply rebranded this previous 12 months to mirror extra emphasis on blockchain. These are all leaders in digital banking that we’re excited to see develop in 2022 and past.

The final pattern I need to cowl is type of a mixed a metaverse and immersive expertise. Now this actually impacts all of our indices, however AI is the crux of this. Certain. You would possibly consider simply placing on a headset just isn’t actually AI, however you’ve got obtained to have the ability to quickly analyze the information coming with laptop imaginative and prescient and sensors. It’s important to ship that information off someplace utilizing 5G the place it is synthesized and analyzed to offer you actual time content material. So I feel lots of people marvel what is going to metaverse contact and impression. I feel it is what will not it contact? What’s going to it change? Would you fairly have a cellular phone or augmented actuality contact lenses or glasses? Moreover philosophical areas, I feel we will all agree we have spent an excessive amount of time trying down at a telephone and touching. So some purposes that we’re and enthusiastic about are schooling, healthcare, teaching, video games. These are a number of the extra client centered. On the opposite aspect and equally as essential, we’re manufacturing, and manufacturing, and new varieties of merchandise which can be extra vitality environment friendly, sustainable, and simply general higher, and safer for the surroundings. This real-time suggestions and customized expertise requires immense information units and evaluation and throughput. So index members and semiconductor corporations like Nvidia, Taiwan Semiconductor, AMD are offering a variety of the uncooked horsepower right here. However this additionally requires a variety of design and purposes.

We’ve to primarily recreate the digital or the bodily world within the digital world right here to have the ability to perceive it. And so corporations like Adobe, Dassault, Autodesk are powering a variety of the innovation right here. For instance, the Dassault is working in various completely different fashions, digital digital twins that characterize your personal physique. So this can be utilized throughout healthcare, throughout simply self-analysis and wellness traits, issues like that to provide you a greater snapshot and really construct software layers on prime of that. One other one, when you have a look at the underside proper nook, you will see a man carrying a headset, and that is a collaboration between two THNQ members, Microsoft and Trimble. And so they’re working to offer frontline staff with a useful helmet with an augmented actuality overlay to get actual time data and communications with out having to make use of one other gadget. Think about they’re up in a constructing. They do not should be coping with that. It is a seamless overlay. And it is a dwell product now getting deployed, which is unimaginable. In order that being stated, I feel we will transfer on to Q&A. Be at liberty to ask any questions round something we have lined.


Jeremie Capron:

Okay. Thanks very a lot, Nina and Zeno. I see we now have fairly just a few questions coming by means of the field right here. I need to remind everyone be happy to sort your questions in and we’ll attempt to handle as many as doable. I need to kick off with a number of the questions I’ve seen round investing in corporations with no earnings within the present surroundings. I feel that is an excellent query. It is actually essential given the change out there regime that we have witnessed over the previous a few quarters as inflation began creeping up. We’re beginning to see what sort of form the financial coverage responses goes to have. As I stated in This autumn, This autumn was brutal for a lot of so-called disruptive expertise shares, however when you look below the duvet, you have a look at what shares have come down or come crashing down in lots of circumstances. These are the shares that I might qualify as a number of the extra speculative names on the market, corporations which have very formidable plans, and guarantees of earnings which can be very far out into the longer term. And within the meantime, they’re burning money they usually’re scaling. The excellent news is that within the ROBO World portfolios, you aren’t going to search out excessive publicity to these names.

We do personal in these industries some corporations that haven’t any earnings at the moment, however they’re the exception fairly than the norm. In actual fact, and is one thing that we quoted within the annual index evaluation report that we simply revealed yesterday, when you have a look at ROBO, the variety of shares which have an EV to gross sales a number of above 10 instances is round 15. So there’s 15 shares out of a complete 84 that commerce on a excessive income a number of, and that is indicative of little or no to no earnings. And in order that’s about 20% of the portfolio, however on the similar time, there’s one other 10 shares which can be buying and selling on an EV to gross sales a number of of much less one time. And so that ought to actually provide help to perceive that the diversification that we now have in our portfolios. And that is a extremely essential pillar of our funding methods for all three thematic indices. And so ROBO truly outperformed international equities in This autumn as a result of the hit it took in a number of the greater a number of names was largely offset by the rotation into the extra cyclical and the extra worth areas out there. So in terms of robotics automation, these worth or cyclical areas are usually present in manufacturing unit automation. These are extra cyclical names. It are typically capital items varieties of corporations.

A variety of them are in Japan. And the Japan piece of ROBO portfolio is essentially underperformed within the first a part of final 12 months and it is beginning to catch up. In actual fact, in 2021, our Japanese holdings had been flat 12 months over 12 months when the index itself was up 16%. We’re not overly involved about what’s taking place when it comes to the rotation within the fairness market now. We predict the indices ought to be comparatively resilient. I feel Nina can touch upon the variety of corporations that aren’t worthwhile at the moment in a healthcare expertise and innovation in that offers you additionally a superb sense of that. Nina, can you’re taking over right here?


Nina Deka:

Completely. Yeah. So about 33% of the businesses in HTEC aren’t but worthwhile, however once we analyze corporations, we’re in search of a transparent path to profitability or some form of clear path to income. Should you have a look at the HTEC portfolio, a lot of the corporations commerce on a a number of of EV to gross sales or perhaps a a number of of EBIDA. So we’re both there primarily the funding alternative there may be in progress or additionally in some form of clear route towards money circulation, which we consider EBIDA can be the illustration of that. Yeah. The overwhelming majority of the businesses do have earnings. And so we do really feel that that’s pretty de-risked from a expertise and innovation basket standpoint.


Jeremie Capron:

Thanks, Nina. I see a variety of questions associated to the index and portfolio building methodology, the rebalancing technique and the weighting of constituent. So I’ll begin off right here and ask Nina and Zeno to remark as properly. However primarily what we do right here is we mix the advantages of energetic analysis when it comes to deciding on finest in school corporations to specific our bullish view on the themes. That is the primary a part of the work. And it implies a variety of evaluation and scoring of every firm in our universe. After which we mix that with the advantages of index investing, the varied funding autos that may monitor indices when it comes to the chance administration, when it comes to having a quarterly rebalancing to take care of that changed equal weighting throughout the portfolio all through the time and never for a protracted time period.

So the result’s that you’ve diversified portfolios as a result of the weightings for every constituents are usually someplace between 0.8% on the low finish all the best way as much as 1.8%. And since we stability each quarter, we reset the weights to that rating pushed weighting. And that implies that the index will promote the largest winners on the finish of the quarter or in the direction of the tip of the quarter and can purchase the largest losers, assuming that these corporations proceed to attain very excessive on our methodology and that we need to personal them for the long run. In order that type of embedded threat administration course of actually allows us to keep away from a number of the greatest pitfalls in disruptive expertise investing. And as we noticed in current month, this may be very painful if you find yourself overly concentrated in a handful of names or in a single very specific subset of the theme.

I feel a terrific instance of that’s what occurred with gene modifying and genomics normally. I feel Nina can touch upon that. We have had a extremely phenomenal 12 months for genomics in 2020 with some large developments and primarily confirming the feasibility of utilizing the CRISPR expertise, for instance. After which final 12 months, these genomic socks and CRISPR particularly got here to earth when it comes to for reconnecting with the worth of the underlying fundamentals. So Nina, why do not you touch upon the gene modifying and precision medication normally? I see we now have just a few questions round that too.


Nina Deka:

Certain. So I did not truly see what the questions had been. I need to guarantee that I do to them. So if I do not reply them, be happy to reprompt me once more, however primarily final 12 months or the 12 months earlier than, I discussed earlier mRNA as a chance. We have solely now seen one sort of mRNA therapeutic come to market and turn out to be commercialized. There are such a lot of others presently within the pipeline. In actual fact, Moderna, one other firm within the HTEC portfolio, had over 20 completely different therapies within the pipeline earlier than the pandemic even occurred. And what we have seen traditionally is when a brand new therapeutic modality has success, then adjoining corporations or different candidates which can be in medical trials or pre-clinical, we are likely to see constructive motion adjacencies to these shares as properly. However we significantly like Moderna as a result of they had been the lead when it comes to the variety of different candidates in medical trials.

So earlier than the pandemic, they had been engaged on a vaccine for HIV, for Zika, for CMV, which continues to progress. It is in section three proper now. And now that one has come to market, that complete modality has been de-risked. And so that could be a constructive catalyst for mainly each different mRNA remedy that individuals are engaged on proper now. I additionally need to level out from Moderna that they are very quickly engaged on a flu vaccine and this might be sport altering. They need to rapidly deliver one to market by form of following standard methodology, bringing mainly a traditional flu vaccine to market. What meaning is that yearly the WHO offers a listing of what they consider the following 12 months’s flu strains are going to be. And pharma corporations want eight, 9 plus months to fabricate this drug and convey it to scale in time for the flu season for every hemisphere. Properly, that is a protracted lead time. And infrequently, the strains which can be predicted to be the dominant strains of the flu season do not wind up being the case. And that is why we do not see a ton of efficacy round flu.

Moderna is engaged on mainly a sport changer perhaps within the subsequent couple of years. They need to have one as a result of it solely takes them a few months to get a drug by means of medical trials or not less than to show that it really works. And so if they’ll get a flu vaccine authorized that solely wants a few month lead time, then they’ll truly develop one nearer to flu season and it may need a lot greater efficacy. This might be sport altering for the entire healthcare trade for the entire world often because tons of of 1000’s of individuals die from the flu. And finally they plan to mix that with COVID and have a mixed vaccine and perhaps even embody RSV, one other vaccine that they are engaged on, however tons of different issues are taking place.

I discussed earlier spatial biology. Precision medication is an space the place therapies are being developed to deal with very particular genetic mutations. And when you can determine, “Okay. Here is the gene the that is inflicting this most cancers.” You may give you a remedy to deal with that very particular most cancers. With spatial biology, you may also decide how efficient a drug might be as a result of you’ll be able to see different genes close by which may intervene with a drug’s capacity to be efficient and really give you an much more customized formulation, if you’ll, or a extra customized remedy. This can even be sport altering as we glance to the longer term and anticipate medicine to get an increasing number of customized. That is going to be enabled by corporations like Roche and different firm in our portfolio with all of their developments. After which there is a ton occurring when it comes to early most cancers detection. Over 10 billions of {dollars} have been invested in M&A for early most cancers de detection in liquid biopsy within the final couple of years. So a extremely thrilling house there. The market is predicted to be properly over $30 billion and other people could have the chance sooner or later to doubtlessly detect most cancers prior to they in any other case would’ve been. And an estimated a 100,000 lives per 12 months within the US alone might be saved with earlier most cancers detection and far larger world wide.


Jeremie Capron:

Thanks, Nina. I see we now have just a few questions on AI. So I’ll invite Zeno to talk one or two and handle them.


Zeno Mercer:

Hello, Everybody. Yeah. I noticed a pair questions round … a pair questions and feedback. Somebody commented, “Anyone predicted this again within the day.” You’ve got obtained questions like, “Why hasn’t AI or metaverse predictions … why have they didn’t materialize?” And one of many issues that I need to level out right here is there is a saying, folks are likely to overestimate what might be completed in a 12 months and underestimate what might be completed or 5 and 10 years. And I feel what we’re seeing right here is that individuals noticed the imaginative and prescient of a variety of these items. As soon as computer systems had been round, as soon as folks realized that there might be one thing that may additionally suppose and make actions and choices, folks theorized that we’d be getting up to now. Perhaps not precisely how, or when, or all these issues, however there’s all the time predictions. And we’re truly seeing a variety of these items come to gentle proper now, as I discussed. We have the metaverse, we had Google glasses, I overlook, over a decade in the past now at this level for a pair little purposes manufacturing, it wasn’t there but. A variety of the, we’ll name it the weakest hyperlinks. The power to offer smaller pixels, extra clear screens. There there is a confluence of supplies, {hardware}, vitality effectivity, which is big. The chip and vitality effectivity for the shape issue.

A variety of that is simply progress by progress. Every incremental innovation stacks on to offer an innovation elsewhere. A extra vitality environment friendly battery permits a drone that usually could not have flown round, to be a client drone to verify issues round. That is abruptly possible. And so switching again to the metaverse and the purposes, we’re on the tipping level now. 2022 as we predict it to pattern, it is taking place. Now, it should begin extra in greater threat greater areas simply type of within the movie trade. The movie trade, they historically filmed aerial views with helicopters. So the primary place to undertake drones was the movie trade as a result of there was an apparent worth with the low threat of adoption. And in order that being stated, we’re seeing that now the identical factor, manufacturing. Different excessive threat areas which have an enormous downside to resolve, but it surely’s trickling down. You’ve got obtained Fb, AKA, Meta. Their glass is to file your occasions in your life. And in order we get to every degree, you are going to have heads up shows that nearly anybody can have.

College students may need glasses that the lecturers monitor and as an alternative of separating bodily schooling and schooling itself, you would possibly be capable of having them work together, and visualizing, and collaborating and you will get extra customized expertise in schooling for teenagers across the globe. You do not have to be within the classroom anymore when you may have that immersive expertise. So we’re simply going to see this large transformation and funding into these areas.

Anyone additionally requested about geographies. Even on our portfolio, a variety of our portfolio weighting is in the US. There is no query. A lot of the innovation throughout all of our portfolio indices are popping out of the US. A a lot of analysis comes out of universities, corporations, it trickles up. Clearly although robotics and AI, we’re Japan, and China, and different areas as properly. Nice concepts innovation come from wherever, however we’re nonetheless closely weighted within the US for that.


Jeremie Capron:

Okay. Thanks very a lot, Zeno. And I’ll thank everyone for becoming a member of. We’re working on the hour simply now. So we’ll wrap it up. Thanks very a lot to your curiosity in ROBO World. You may go to our web site, if you wish to join biweekly publication wherein we share a few of our analysis from corporations, and traits, and the indices that we construct. And with that, I want everyone an excellent day. And we stay up for speaking to you once more very quickly. Goodbye.