It could be time to add robots to your portfolio

The robots are here, but have you let them into your portfolio yet? This year, more people will be thinking of doing so, some inspired by the role they have played during the pandemic and others by a series of significant deals at the end of 2020. 

The automated future is arriving faster than we thought, disrupting business models and working practices. 

One indicator of how the process has accelerated has been the sight of robots spraying disinfectants in hospitals and cleaning floors and surfaces at St Pancras station in London. 

Changing world: The automated future is arriving faster than we thought, disrupting business models and working practices

The World Economic Forum says that as a result of Covid-19, ‘automation and a new division of labour between humans and machines will disrupt 85million jobs globally by 2025’. 

Continuing its mission to be ready for this new world, Ocado – the tech group and grocer – took over two US robotics companies in November. Kindred Systems’ ‘piece-picking’ machines select items for online orders, while Haddington makes dexterous robotic arms. 

Then there was South Korean car maker Hyundai’s $1.1billion purchase of Boston Dynamics. The latter’s most famous product is Spot, the stair-climbing robot dog that can replace humans in dangerous situations like crime scenes, or do routine tasks. It costs $74,500. 

Hyundai plans to put the company’s technology to use in the development of a car with legs that can walk in extreme terrain and also in other projects, such as service robots for the elderly. 

The march of the robots, automation and Artificial Intelligence or AI into our homes is also set to gather pace. 

For many of us, it has already arrived in the shape of Amazon’s virtual assistant Alexa and its Echo Dot speaker. 

Another US company, iRobot – whose shares have risen by 74 per cent since January 2020 – offers robot mops and vacuum cleaners. In fabulous news for husbands everywhere, chief executive Colin Angle predicts that a robot could soon load or unload your dishwasher. 

You may find this particular prospect beguiling, but even if you were freed up from domestic chores to devote time to investing in these new areas, it would still be a challenge. 

Many exciting companies like the Danish Blue Ocean – whose UVD division makes the St Pancras sanitising robots – are not listed on a stock market so it is hard for small investors to grab a piece of the action. 

The language is bewildering and it is hard to discern which innovations will become commercial successes and which will be consigned to the dustbin. 

Acronyms like RPA – which stands for repetitive process automation, software that automates back-office tasks – abound. People tend to talk about AI and robotics as if they were one and the same thing, when they are not. Artificial intelligence involves the development of computer programmes that resemble the workings of the human brain. 

Robotics technology is the development of machines programmed to act on command or using their own memory. 

Unless your New Year’s resolution is to gain an in-depth understanding of these things, the easiest route is probably to find a fund or trust which selects the smartest opportunities. Some have large holdings in Alphabet, the owner of Google, and in Amazon, both of which are mainstream tech stocks that use and develop robotics and automation. Deep Mind, the celebrated British AI business, is a Google subsidiary. 

For many of us, the march of the robots has already arrived in the form of of Amazon’s virtual assistant Alexa and its Echo Dot speaker

But some funds have a more focused approach catering to investors intrigued by an estimate that the global industrial robotics market, worth $39billion in 2019, could grow to $102billion by 2027. The value of AI is harder to quantify but accountant PWC estimates it may be contributing $15.7trillion to the world economy by 2030.

Howie Li, head of exchange traded funds at Legal & General Investment Management (LGIM), ensures his Global Robotics and Automation fund has ‘a very low overlap’ with mainstream technology funds. 

His fund holds shares in the world’s two biggest robot manufacturers – Japanese firms Fanuc and Yaskawa. 

It also holds Intuitive, the Da Vinci robotic surgery business, listed on the US Nasdaq market. 

Li says: ‘We aim to acquire investments with multi-year growth across the whole landscape, one-third large-capitalisation companies, another third medium-sized ones and the rest companies that we think could be bid for.’ 

This is key, since there is a busy pace of mergers and acquisitions in the fields of AI, automation and robotics. LGIM has a separate index fund which tracks the ROBO Global Robotics and Automation index. 

Last year, five of the index’s constituents received bids, although not all were successful. 

This underlines the risks of investing in these areas, however thrilling the advances that are being made.

The barriers to making money include human opposition: fear about the destruction of jobs by machines has been about since the Industrial Revolution. 

Dzmitry Lipski of Interactive Investor highlights the opportunities on offer at two funds – Pictet Robotics and Smith & Williamson Artificial Intelligence. He emphasises they should not be considered core holdings but part of a diversified portfolio. 

If you are prepared for a New Year punt, it may be worth backing the tide of change and the view that AI, automation and robotics can be used to make work safer and less tedious and also create jobs, massively boosting world economies. 

This would turn the machines from the stuff of nightmares into the dream scenario.