Eurof Uppington (pictured) is the manager of disruptive innovation strategy at EUR1.5 billion Quaero Capital.
The former long/short technology fund manager is launching a long/short market neutral fund for Quaero, designed to focus on the unexpected pace and impact of radical change. Three areas in particular will benefit from disruption, he believes. Factory automation, pharmacy and the retail sector.
“There is a confluence of different trends,” he says. “Technologies are becoming sufficiently cheap and fool proof for them to be used by everybody.”
The technologies of computing, connectivity, the internet of things, artificial intelligence and robotics automation are part of a new industrial revolution, Uppington says. “Previous industrial revolutions were about moving heavy objects or creating power or getting goods transferred from A to B.
“Then it was about creating the telegraph, the telephone, radio, television and then the internet and what’s really happening is that the internet has made everything step up a gear which affects everything.”
For Uppington, these exponential processes are having their effects in the real world. “Airbnb is the largest hotel group but owns no hotel rooms, while the biggest taxi company owns no cars. Every industry has some weird stuff happening and the rapid change in industries creates winners and losers.”
The fund will launch with USD7 million under management and has been run as a model portfolio since November last year, returning just over 12 per cent year to date. It’s made money on both the long and short side on the back of capturing strong trends, Uppington reports.
As a technology fund manager, Uppington found he was increasingly less interested in looking at the so-called FANG companies of Facebook, Amazon, Netflix and Google, as they dominated technology offering few opportunities for diversification.
“However, their technology has disrupted other companies,” he says. “People don’t understand the effect of these technologies in insurance or capital goods or real estate or travel. That’s the road less travelled that we are trying to travel on.”
Some of the firms in which Uppington’s model portfolio is invested include Honeywell and Siemens, where he is looking at the opportunities offered by increasing factory automation.
Non-industrial companies in his portfolio include Adidas’ Speedfactory and the gap with Nike in producing athletic footwear. Pharmaceutical is another sector attracting his attention with speculation rife that Amazon has ambitions to expand into pharmaceutical through acquisition or organic growth.
Uppington is shorting offline retail food chains from the chains themselves to mall owners and REITs. He believes that potentially the most shattering effect could be felt by those who finance the REITs, nearly all of whom are heavily indebted. His first short in this area is BOK Financial, a local US bank with around 15 per cent exposure to mall operators.