latamen
Coming soon: industry 4.0

Coming soon: industry 4.0

24-05-2017 | Insight

Imagine a whole new world. A world in which self-driving cars populate the streets, artificial intelligence makes production faster and smarter, sun and wind fuel local production and cybersecurity keeps us safe. The newly launched Robeco Global Industrial Innovation Equities strategy invests in the companies that are making this happen.

  • Henk Grootveld
    Henk
    Grootveld
    Head of the Trends Investing Equity team and Portfolio Manager
  • Marco van Lent
    Marco
    van Lent
    Senior Portfolio Manager Equities

Speed read

  • New trend strategy invests in the industry of the future
  • Focus on four strong trends provides risk diversification
  • Trends: robotics, digital manufacturing, energy transition and cybersecurity

Robeco Global Industrial Innovation Equities selects long-term growth trends driven by demographic, technological or regulatory changes. Lead portfolio manager Marco van Lent and Henk Grootveld see a number of trends that will change the face of production, shaping what they call the fourth industrial revolution. While the first industrial revolution was marked by the shift from manual to mechanical production, the second one by mass production and the third one by automation, the fourth industrial revolution is all about the next stage of automation, with the advent of robots, the Internet of Things and cyber-physical systems.

Within this transition, Van Lent and Grootveld discern four disruptive trends, i.e. Robotics, Digital Manufacturing, Energy Transition and Cybersecurity. Investing in multiple trends rather than one benefits the portfolio’s diversification and increases its breadth.

Stay informed on our latest insights with monthly mail updates
Stay informed on our latest insights with monthly mail updates
Subscribe

1. Robotics: we’re only at the beginning

The first trend focuses on robots, co-bots, automation, advanced driver-assistance systems (ADAS) and autonomous cars.

The portfolio managers foresee that robots will replace most heavy-duty work still done by humans. And this will promote the return of local production. After all, whereas labor costs differ greatly from one country to another, the price of robots is more or less equal. In terms of costs, it doesn’t matter so much whether a robot sews a pair of jeans together in Beijing or Chicago. For the US market, the latter is even more attractive because of lower transport costs and shorter delivery times. Embracing robot technology and automation is the solution for both a shrinking labor force and rising labor costs, as robots become smarter and cheaper.

2. Digital Manufacturing: a way to lower costs and increase sales

The second trend revolves around Big Data, Artificial Intelligence, the Internet of Things (the interconnection via the Internet of computing devices in everyday objects), Digital Infrastructure and Augmented Reality & Virtual Reality.

Factories are becoming smarter due to new digital production techniques. Market research company IDC predicts that 75% of all enterprises and independent software vendors will include Artificial Intelligence (AI) functionality in at least one application by 2018. That is next year. AI will allow faster decision making, productivity gains, pattern detection (allowing companies to make suggestions to their clients) and increased data monetization.

3. Energy Transition: renewable energy will become the cheapest source

The third trend is about  solar and wind energy, energy storage and the smart grid.

Renewable energy is rapidly becoming cheaper. Bloomberg New Energy Finance expects wind and solar energy to be cheaper than natural gas by 2020 and cheaper than coal by 2024. The increased use of renewable sources in electricity generation requires heavy investments in ‘smart grids’, as renewable generation is inherently unpredictable. A smart grid is an electrical grid which uses digital information and controls technology, such as smart meters and renewable energy, to improve the reliability of the grid.

4. Cybersecurity: keeping the world safe

The fourth and final trend is cybersecurity.

Recent hacks upsetting the functioning of hospitals, telecommunications companies, railways and airlines expose our vulnerability to cyber-attacks. This vulnerability has increased rapidly with the advance of cloud computing and the Internet of Things. Cybersecurity has become a necessity and not surprisingly, IT spending on security has grown substantially over the past ten years.

Why now?

The average age of production facilities, especially in the US, has never been as old as today, as most investments were postponed due to the Global Financial Crisis. In addition, demographic developments ensure a long-term need for automation and the strongest robot penetration is found in countries with shrinking labor markets. The technologies to make a new, smarter and more efficient way of producing possible are developing quickly. Populist governments are supporting this development. Trump’s America first and China’s shift to a more domestic consumption-driven economy are kick-starting the industry of the future.

Subjects related to this article are:

Important information

The Robeco Capital Growth Funds have not been registered under the United States Investment Company Act of 1940, as amended, nor or the United States Securities Act of 1933, as amended. None of the shares may be offered or sold, directly or indirectly in the United States or to any U.S. Person (within the meaning of Regulation S promulgated under the Securities Act of 1933, as amended (the “Securities Act”)). Furthermore, Robeco Institutional Asset Management B.V. (Robeco) does not provide investment advisory services, or hold itself out as providing investment advisory services, in the United States or to any U.S. Person (within the meaning of Regulation S promulgated under the Securities Act).

This website is intended for use only by non-U.S. Persons outside of the United States (within the meaning of Regulation S promulgated under the Securities Act who are professional investors, or professional fiduciaries representing such non-U.S. Person investors. By clicking “I Agree” on our website disclaimer and accessing the information on this website, including any subdomain thereof, you are certifying and agreeing to the following: (i) you have read, understood and agree to this disclaimer, (ii) you have informed yourself of any applicable legal restrictions and represent that by accessing the information contained on this website, you are not in violation of, and will not be causing Robeco or any of its affiliated entities or issuers to violate, any applicable laws and, as a result, you are legally authorized to access such information on behalf of yourself and any underlying investment advisory client, (iii) you understand and acknowledge that certain information presented herein relates to securities that have not been registered under the Securities Act, and may be offered or sold only outside the United States and only to, or for the account or benefit of, non-U.S. Persons (within the meaning of Regulation S under the Securities Act), (iv) you are, or are a discretionary investment adviser representing, a non-U.S. Person (within the meaning of Regulation S under the Securities Act) located outside of the United States and (v) you are, or are a discretionary investment adviser representing, a professional non-retail investor. Access to this website has been limited so that it shall not constitute directed selling efforts (as defined in Regulation S under the Securities Act) in the United States and so that it shall not be deemed to constitute Robeco holding itself out generally to the public in the U.S. as an investment adviser. Nothing contained herein constitutes an offer to sell securities or solicitation of an offer to purchase any securities in any jurisdiction. We reserve the right to deny access to any visitor, including, but not limited to, those visitors with IP addresses residing in the United States.

This website has been carefully prepared by Robeco. The information contained in this publication is based upon sources of information believed to be reliable. Robeco is not answerable for the accuracy or completeness of the facts, opinions, expectations and results referred to therein. Whilst every care has been taken in the preparation of this website, we do not accept any responsibility for damage of any kind resulting from incorrect or incomplete information. This website is subject to change without notice. The value of the investments may fluctuate. Past performance is no guarantee of future results. If the currency in which the past performance is displayed differs from the currency of the country in which you reside, then you should be aware that due to exchange rate fluctuations the performance shown may increase or decrease if converted into your local currency. For investment professional use only. Not for use by the general public.

I Disagree