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Artificial intelligence - a truly smart investment opportunity, says Smith & Williamson
08/08/2017 , Tristan Blythe, Group Editor

Much that in the not too distant past was thought of only existing in the realms of science fiction has started to enter our everyday life. As the power of computers has increased so technology has become an integral part of our work and social life.

One element that has steadily increased in recent years is artificial intelligence (AI). Not only is this transforming our interactions with computers,  it also presents strong investment  opportunities, according to Chris Ford and Tim Day, co-managers of Smith & Williamson’s recently launched actively managed global thematic Artificial Intelligence Fund.

Mr Ford told thewealthnet that investing in AI does not mean simply investing in the tech sector. Instead many of the opportunities lie in the firms that are in the vanguard of applying and using AI in their business.

Mr Ford said there is “low hanging fruit” in the sectors that had already embraced AI, such as insurance, healthcare and financial services. He added that there were commonalities that meant these sectors had been able to be early adopters of the technology.

“They tend to handle large amounts of data and involve highly repetitive tasks that require a great deal of accuracy,” he said.

In these sectors some firms have embraced AI more quickly than others, but the pair says those that have not will struggle to compete as those that have benefit from the competitive advantages and deeper customer insight that AI brings.

Mr Day demonstrated these benefits by citing some examples with the healthcare sector. Babylon Health is a triage system that uses AI that is currently being trialled by the NHS. The AI generates a diagnosis before the patient engages with a human healthcare professional.

One advantage of this is that the system is constantly learning and therefore staying up to date as well as improving. For a GP to stay up to date with the latest developments they would need to study for 150 hours a week, research suggests. Clearly this is not realistic and gives the AI an advantage over humans.

Mr Day also cited Watson, IBM’s AI project, and the steps it is making in oncology with accurate and speedy diagnosis.

However, both Mr Ford and Mr Day believe that AI will come to all sectors as they, and the AI technology evolves. Regardless of the sector, they say investors should ask all firms what their AI strategy is as it will increasingly become a key element to success.

“Almost everybody, whether they were aware of it or not, has experienced AI,” he said. “Whether they have searched online for holidays or the like, seen online adverts or many other cases. It is only going to grow and no part of economy is going to be immune to it.”

Although the opportunities to invest are arguably going to increase, Messrs Ford and Day say the fund will continue to only invest in around 30 to 35 stocks at any one time to give a concentrated portfolio.

But the fund does not just invest in AI; it also backs its conviction in the benefits of this technology by using AI in its stock selection process. Smith & Williamson worked with AI specialists Orbit to create a system that “looks across the world economies and delivers back companies that are benefiting from AI.”

This is more efficient that using a traditional buy-side research team and has also done away with some of the problems associated with it, such as individuals on the team not having a consistent approach or definition of what is relevant. In addition, AI is able to have a wider reach and utilise machine learning. Mr Ford said that he believes that without AI some of the investments the fund has made would not have been discovered.

Indeed, he added, the firm has seen the benefits and is starting to consider how AI can be implemented in other thematic funds.

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