Interview with Jacques-Aurélien Marcireau, Fund Manager of Edmond de Rothschild Fund Big Data.
What is the impact of the geopolitical situation on the technology sector and the more traditional players using data?
Since the year-end 2021, the fund has been strengthening its exposure to cybersecurity and to strategic infrastructure companies (which now represent c.35-40% of the fund holdings) on rising geopolitical risks. It is our conviction today that cyber-defense, cybersecurity and critical infrastructure will benefit from a structural increase in spending for the years to come. While these companies held well during the recent downturn, we believe their growth prospects are substantially higher than pre-conflict.
An interesting development came out mid-April as Sailpoint, one of the fund’s top holdings, a fast-growing leader in the governance/identity cybersecurity field, received a buy-out offer from a private equity fund. This latest piece of news is an interesting catalyst as it reveals the relative scarcity of high quality assets in cyber security and more broadly in tech and their strategic value in world where security has become front and center.
In the energy sector, one of our core holdings Schlumberger is another key beneficiary of the energy security theme in oil services and will benefit in our view from higher spending after years of under-investment.
Has this environment changed the investment strategy of EdR Fund Big Data?
No, and it is actually the opposite as this volatility has made the benefits of our approach more visible. Since the fund’s launch, we have continued to apply the same process built on a stringent valuation discipline and risk management principles inherited from our Group’s wealth preservation philosophy. Over the years, the most relevant factors in terms of differentiation have been the consistency in the fund’s delivery and the fact that we have remained true to our initial conviction, which is to harness the fantastic value creation opportunity of the Big Data theme. This is done using a unique thematic lens and disciplined process, investing across sectors and not restrict ourselves to just technology. This is what our clients have recognized. In concrete terms, the fund thematic breakdown continues to be evenly split around its three core themes (Data Analytics, Infrastructure, Data Users) and remains 100% stock specific. We continue to focus on high quality, free cash flow generative businesses with strategic technology, which should do well in our view in a rising rate environment. And this positioning has been key to its resilience and performance since its launch. This positioning is supported by the confidence of our clients: at the end of 2021 the fund passed the €1 billion mark under management!
What is the outlook for the months to come?
Volatility should indeed remain quite high in the coming months in our view. However, we believe that the portfolio continues to be extremely well positioned, as automation, artificial intelligence and machine learning (AI/ML), digital transformation, cybersecurity and cloud computing are seen as key priorities. Growth will be robust for the companies we invest for many years in our view as businesses and their customers seek to build upon the new digital skills they acquired during the Covid crisis.
In a nutshell the fund should continue to be extremely resilient in the current context through its defensive positioning and the strategic nature of its holdings (energy, cybersecurity and tech/telecom Infrastructure). We are convinced that selectivity and valuation discipline will remain key in the months ahead.
1 Source: Edmond de Rothschild Asset Management (France). AUM at 18/03/2022: 1273M€.
DISCLAIMER
The information about the companies cannot be assimilated to an opinion of Edmond de Rothschild Asset Management (France) on the expected evolution of the securities and on the foreseeable evolution of the price of the financial instruments they issue. This information cannot be interpreted as a recommendation to buy or sell such securities. The composition of the portfolio may change in the future.
Past performance and past volatility are not reliable indicators for future performance and future volatility. They may vary over time.
KEY INVESTMENT RISKS
Edmond de Rothschild Fund Big Data is a sub-fund of the Luxembourg-registered SICAV (investment fund in the form of a company with variable capital), approved by the CSSF (the Luxembourg financial supervisory body), and authorised for marketing in France, Austria, Germany, Switzerland, Italy, Taiwan, Belgium, the United Kingdom, Luxembourg and Spain.
This sub-fund is rated in category 6 on a scale of 1 to 7, which reflects the exposure of up to 100% of its assets to the equity markets, which have a high risk and reward profile. The risks described below are not exhaustive. It is up to each investor to analyse the risks associated with each investment and to form their own opinion. The list of risks described below is not exhaustive: it is up to each investor to analyse the risks associated with each investment and to form their own opinion.
Risk related to discretionary management: the discretionary management style is based on performance expectations for the different markets (equities, bonds). However, it is possible that the Fund will not always be invested in the securities with the highest performances. Capital risk: a stock’s value can fluctuate according to issuer-specific factors, as well as different market, economic and political factors that can cause significant variations in the net assets and can have negative repercussions on the Fund’s performances. Risk related to investing in small and mid-cap companies: investments in small and mid caps can carry a higher risk than investments in larger more established companies. The value of Sub-funds that invest in small companies can fluctuate more than that of other Sub-funds due to the potentially higher volatility of the share prices of smaller companies. Currency risk: the Sub-fund is exposed to a foreign exchange risk when it invests in assets denominated in a currency other than its reference currency. Concentration risk: some Sub-funds can concentrate their investments in assets belonging to specific economic sectors. They will therefore be subject to the risks related to the concentration of investments in these sectors.
April 2022. This document is issued by Edmond de Rothschild Asset Management (France). This document is non-binding and is for information purposes only. The reproduction or use of its content is strictly prohibited without the authorisation of Edmond de Rothschild Group. The information provided in this document shall not be construed as an offer or a solicitation to enter into a transaction in a jurisdiction in which said offer or solicitation would be illegal, or in which the person at the origin of this offer or solicitation is not authorised to act. This document does not constitute, nor shall it be interpreted as, investment, tax or legal advice or a recommendation to buy, sell or hold an investment. EdRAM shall not be held liable for an investment or divestment decision taken on the basis of this information. The UCIs presented herein may not be authorised for marketing in your country of residence. If you have a doubt about your ability to subscribe to a UCI, we advise you to speak to your advisor. Every investment carries specific risks. Investors should ensure the suitability of the investment with respect to their personal circumstances, and when necessary seek independent advice. Furthermore, investors are advised to read the key investor information document (KIID) and/or any other document required by the local regulation that is provided before subscription and available on the website http://funds.edram.com or upon simple request free of charge. “Edmond de Rothschild Asset Management”, or “EdRAM”, is the trade name of the asset management entities of Edmond de Rothschild Group.
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Edmond de Rothschild Asset Management (France)
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Public limited company with an Executive Board and a Supervisory Committee - Share capital €11,033,769 - AMF authorisation number: GP 04000015 - Paris Trade and Companies Register number: 332 652 536
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Edmond de Rothschild Asset Management (France)
47, rue du Faubourg Saint-Honoré, 75401 Paris Cedex 08