JPM Global Macro Opps Team Introduces 'widespread Technology Adoption' Theme To £905m Fund

Co-managers Shrenick Shah, Talib Sheikh and James Elliot scrapped their 'low inflation' theme in January on the fund, which usually invests across eight macro themes in total, and have worked on the new technology theme since then, introducing a significant position last month (see chart, below). 

Shah said: "We are talking about really fast adoption and innovation in technology. Acceleration in these areas means technology is becoming invasive across a wide range of areas in the global economy and in many industries.

"Most of our decisions are going to require a technology context. If we invest in certain equities, we need to know how tech is going to impact them or what risks it could pose. This theme will persist and have a solid position in the portfolio going forward."

IW Podcast: The growth and impact of disruptive technologies

Despite being wary in the past of the risks of introducing technology as simply a "sector play", a number of factors and therefore investment opportunities prompted the team to introduce the theme, such as the cost of data storage coming down and the advancement in chips and algorithms.

Shah added: "We were already invested in global memory stocks and started building on that in November 2016, partly driven by the fact we think more applications will be needing more memory.

"So much data is being generated across all industries so the cost of storage is decreasing exponentially."

However, the new theme is also represented by some short positions, largely in consumer staples, an area which Shah feels has seen pricing pressure from technology giants such as Amazon.

Global reach

The 'widespread technology adoption' theme is largely focused on the US and Asia, which are regions where the managers are also finding opportunities represented by other themes in the portfolio.

For example, the 'US economic strength' and 'emerging market rebalancing' themes were renamed this year to 'maturing US cycle' and 'emerging market convergence' respectively, which Shah calls a "natural evolutionary development".

"The change in perspective on emerging markets is particularly exciting for us as we had been quite negative on EMs for the first four years of running the fund," Shah said. "This year things have changed and the word 'convergence' reflects our more positive view.

"We have identified EMs are at the start of a new business cycle; the region has been through a trough and is coming out the other end. We feel there is a good runway for growth for the region for the next several quarters."

Is optimism for EM equities justified?

Over one year to 24 October, the fund has returned 13.8%, outperforming both its IA Targeted Absolute Return sector average return of 3.3% and its LIBOR GBP 1 month benchmark return of 0.3% during the same period, according to FE Analytics.