Tune in for a dialogue to study extra about the important thing M&A traits throughout robotics, AI and healthcare tech in 2021 up to now. For a deeper dive into probably the most fascinating M&A exercise in 2021, obtain our M&A Report beneath.
Webinar Transcript:
Jeremie Capron:
My title is Jeremie Capron. I am the Director of Analysis right here at ROBO World, I am speaking to you from New York. And with me on the decision as we speak are my colleagues from the analysis crew, Lisa Chai, Nina Deka, and Zeno Mercer. And as we speak we’ll speak about robotics, automation, AI, healthcare applied sciences, with a deal with deal exercise, which has considerably elevated within the final 18 months. So we’ll be each the general public fairness facet and the non-public facet, enterprise capital.
We’ll be discussing a few of the key traits and we’ll be sure that to avoid wasting time in your questions. A few of you recognize we recurrently share a few of our analysis on the roboglobal.com web site and our in biweekly emails. And we simply revealed a brand new report protecting as we speak’s presentation in better element. So be at liberty to obtain this report, join our e-newsletter, roboglobal.com.
So let me begin with a fast reminder what we do right here. We’re a analysis and funding advisory firm that is centered on robotics, AI, healthcare applied sciences. Eight years in the past, we put collectively a crew of funding professionals and trade consultants with the purpose of designing thematic, funding methods round what we imagine to be a technological revolution. Robotics, AI are a set of basic objective applied sciences that may be utilized to each trade. We give it some thought just like the web or electrical energy, and that is providing great funding alternatives.
In the present day there’s over 4 and a half billion {dollars} in funds monitoring our methods, they’re primarily in ETFs. Probably the most notable might be ROBO, R-O-B-O, that was the primary robotics and automation index portfolio that launched in 2013, and now in its eighth 12 months. And our analysis round automation led to understand that one thing crucial is going on in two areas that adjoining to robotics automation.
And so in the previous few years we launched two extra index portfolios. The primary one is T-H-N-Q, or THNQ, that’s the synthetic intelligence index. And the second is every H-T-E-C, or HTEC, that’s the healthcare expertise and innovation index. These should not your conventional ETFs or methods mixed, a research-driven method, with the advantages of index investing and the ETF wrapper. What you discover in these portfolios is such greatest at school corporations from all over the world, small, mid, giant caps, which are roughly equal weighted and rebalanced each quarter. So they’re diversified but they’ve a really excessive energetic share relative to uncooked fairness indices just like the S&P 500.
And the three methods have outperformed international equities since inception, as you’ll be able to see on this desk that exhibits index returns as of the tip of final month, August, 2021. You’ll be able to see the returns has been fairly passable. They have been pushed by structural and technological drivers of adoption for these applied sciences, and the robust monetary efficiency of the businesses which are main this revolution. So, M&A has been a reasonably robust tailwind to the ROBO return since we first designed the portfolio in 2013. And that is within the context of little greater than 80 corporations in that in our portfolios, we see 25 takeover makes an attempt since we began eight years in the past, and we’ll get again to that. However actually the vital level right here is that we have seen a transparent acceleration previously 18 months and that’s regardless of the numerous enterprise disruptions in the course of the pandemic.
In reality, it is pretty stated that robotics, AI, healthcare applied sciences are seeing an ideal storm of capital now. We are actually virtually three quarters into 2021, and we’re one other file 12 months when it comes to mergers, acquisitions, enterprise funding. We have now a file variety of beginning of unicorns, we’ve got huge IPO’s. We predict the pandemic has turbocharged digitization of our financial system, and has left some main scars as we come out the opposite facet. You concentrate on the provision chain disruption, rising commodity costs, rising transportation prices. We have now shortages, semiconductor shortages. We have now labor shortages. And that is actually led to a race to automate and digitize, and that is turn out to be a prime strategic precedence for the businesses all over the world. And particularly these bigger, slower shifting organizations, they perceive that they should have a presence and capabilities round automation. And in lots of instances, they’re behind the curve and they should purchase reasonably than construct these capabilities and that they are able to pay up for high quality companies.
On this subsequent slide, I need to spotlight that the expertise and market leaders in AI, in robotics, in healthcare tech, the businesses in our three portfolios they are typically top quality companies when it comes to their margins, their return on capital, the energy of their steadiness sheet. And this chart right here, it exhibits the proportion of corporations with a web money place for ROBO, HTEC and THNQ, and a few uncooked fairness indices. And so 70% of the businesses within the synthetic intelligence index, the THNQ index, have extra cash than debt, that is a measure of steadiness sheet energy. That’s much more than what you will discover within the NASDAQ or the S&P 500.
I additionally need to level out that the businesses we’re speaking about right here, they don’t seem to be simply US corporations. You’ll be able to see we’ve got greater than 13 nations had been introduced. And loads of these corporations are small and mid-caps between 40 and 50% of the ROBO and HTEC portfolios. The overwhelming majority of them, they don’t seem to be represented within the S&P 500 or within the international fairness indices. And so most traders have very restricted publicity to robotics, AI and healthcare tech.
So, let’s take a look at what’s taking place in robotics automation first, then I am going to move it on to my colleagues to debate the healthcare tech and AI, after which we’ll wrap up with what’s taking place on the enterprise capital facet. So, it is a chart of complete returns for ROBO over the previous 5 years, it is simply above 21% compound common annual charge. You’ll be able to see the names of the businesses which have obtained a takeover supply throughout these 5 years. And as I stated earlier, within the seven or eight years that we have been operating it, we’ve got seen 25 takeover makes an attempt on our portfolio corporations, out of a complete of about 80 within the portfolio.
So at the start of the 12 months, in case you transfer to the subsequent slide, I need to spotlight a few of the offers we have seen this 12 months. And every of these takeouts usually occurs at a premium and that gives a tailwind to the portfolio returns. The primary one we noticed was FLIR methods. FLIR is a frontrunner in thermal imaging sensors. They’ve agreed to be acquired by Teledyne, that’s one other ROBO index members, for $8 billion. And FLIR is the worldwide chief in thermal infrared sensing, and so they have robust capabilities additionally in drones and machine imaginative and prescient. After which we noticed a vital takeout, which is that of Nuance by Microsoft, for $16 billion. Nuance in conversational AI, is the one firm that is in all three portfolios. So I am going to let’s Zeno focus on the Nuance Microsoft state of affairs once we cowl AI in a couple of minutes.
Then we noticed Raven comply with be acquired by CNH, that is a $2.1 billion transaction. Raven has been within the ROBO portfolio for a few years. It’s a chief in agriculture expertise, particularly precision farming. They make autonomous options for farm gear and CNH is without doubt one of the international leaders in ag equipment. And in order that’s one other instance of how the larger organizations are actually seeking to purchase these autonomous and automation capabilities through acquisitions.
After which we’ve got HollySys, that is a frontrunner in manufacturing unit automation in China, is a Chinese language firm. It is obtained a number of affords, beginning final 12 months, to go non-public. One was led by a founder and former chairman of the corporate. One other one got here from the previous CEO of the corporate together with a personal fairness group. And these affords have been about 30% of each the inventory value earlier than the knowledge grew to become public.
There’s yet one more deal right here, that’s Blue Prism. About a few weeks in the past we heard from Blue Prism that they’ve been in discussions to go non-public, as properly, with two totally different PE teams. The inventory jumped greater than 30% as properly. Blue Prism is a prime three participant in robotic course of automation, that’s RPA, that is primarily software program robots that automate enterprise processes. So, that is it for ROBO. I need to remind everybody that you would be able to ask your questions through the Q&A field. And with that, I’ll move it on to Nina to debate the healthcare tech.
Nina Deka:
Thanks, Jeremie. So, HTEC is our healthcare expertise and innovation index. The ticker is HTEC. As you’ll be able to see right here, we have HTEC efficiency in comparison with the worldwide healthcare index, in addition to international equities. And as you’ll be able to see over a 3 12 months interval, healthcare tech has actually outperformed. In reality since inception the healthcare expertise and innovation index has greater than doubled simply common international healthcare indices. After we take into consideration what’s driving this out efficiency, there’s a giant demand for lots of disruption taking place in healthcare proper now. An enormous alternative for digitization, automation, an increasing number of robots are being deployed and large progress alternatives in genomics. As these applied sciences scale, they’ll get an increasing number of environment friendly.
So loads of corporations throughout the healthcare expertise panorama are literally collaborating in M&A so as to go after and get publicity inside their organizations to loads of these new applied sciences. In reality, in case you had been to have a look at… Truly, the subsequent slide could be… Yeah. So right here we discuss in regards to the form of the deal abstract right here. As you’ll be able to see in 2019, there have been 59 offers throughout the HTEC index and so they totaled about 17 billion. After which that quantity skyrocketed in 2020, there have been 93 offers, totalling practically 67 billion. After which right here we’re 12 months so far in 2021. And we’re probably on monitor to be stage with final 12 months, if not surpass final 12 months when it comes to variety of offers and deal worth.
So, M&A is basically sizzling within the healthcare tech panorama and we’re seeing a typical theme this 12 months significantly throughout the diagnostics companies. Just a few highlights. One firm particularly, Thermo Fisher Scientific, it is a international diagnostic big. They acquired PPD, a number one medical analysis group, often known as CRO. CROs are corporations that assist pharma corporations develop medication. And about two thirds of all drug improvement is outsourced to corporations on this CRO trade.
So Thermo is getting publicity to all the expansion taking place in biopharma. They acquired one other drug manufacturing firm, a number of years in the past, named Patheon, and now they’re within the drug improvement house additional with this acquisition of PPD. The valuation of the acquisition is sort of $20 billion in case you issue within the debt and the deal is predicted to shut in This autumn of this 12 months. So simply to present you an thought of what Thermo now has.
Going ahead is, PPD is a world chief in these medical analysis and medical trials. They function in over 50 nations. Within the final 5 years, they helped assist greater than 400 drug approvals. These are corporations which are type of behind the scenes that lots of people do not hear about that basically assist pharma corporations convey medication to market. And with this acquisition, Thermo expects so as to add a greenback 50 in earnings per share, in the course of the first 12 months of possession of this asset.
In order that’s only one instance of the bridging that we’re seeing happening from the diagnostics world additional into the drug improvement world. There are different areas taking place in diagnostics. Danaher is one other firm. They’re a number one producer in life science diagnostics and lab automation. They usually acquired a medical analysis group, Aldevron, for $10 billion, in order that they might go additional into genomic drugs.
After which PerkinElmer, that is one other international main diagnostic firm. They acquired the most important acquisition within the firm historical past, BioLegend, for 5 billion. And this helps them get additional into the antibodies and reagents house. So actually thrilling issues taking place in drug improvement, significantly as medication get an increasing number of into the precision drugs, if you’ll, extra into DNA and RNA varieties of medication. So these diagnostic corporations are going after this progress space by means of M&A, and we anticipate to see extra of that sooner or later. So with that, I’ll pause and I am going to go forward and switch it over to Zeno, who’s going to assist us speak about THNQ.
Zeno Mercer:
Thanks, Nina. All proper. So, the THNQ index goals to seize alternatives and synthetic intelligence throughout our 11 subsectors, which cowl the whole ecosystem, from core infrastructure to functions and companies. AI has confirmed to be instrumental, not only a good to have, however a have to have with ever growing quantities of knowledge that requires speedy evaluation and processing for each shopper and enterprise functions. And customary giants throughout all industries are investing in home, investing by means of partnerships and acquisitions as leaner AI pushed corporations seem within the aggressive panorama.
Close to the date, the THNQ index is up 12.6% barely beneath the broader international market index that’s up 16% for the 12 months. Take into accout, the THNQ index surge greater than 68% in 2020, and it continues to outperform international indices on an annualized foundation. Of the 5 takeout affords this 12 months, there have been… Oh, maintain on. Slides of shifting round. There’ve been 97 accomplished acquisitions by THNQ index members, in 48 offers pending, for over 74 billion in worth to this point in 2021. That is on monitor to match the 4 12 months 97 billion in complete deal worth in 2020.
Notably, Sq.’s introduced its intent to amass Afterpay for $29 billion. A bid to tackle Visa, MasterCard, huge banks, and direct to shopper finance, e-commerce and in-person, with purchase now pay later play capabilities. This deal brings collectively two of the quickest rising fintech powerhouses to superior monetary inclusion and accessibility to all.
One other firm, Nvidia, whereas going through regulatory hurdles for its Arm acquisition introduced final 12 months, has not stopped constructing its expertise portfolio to strengthen its management in AI with our acquisition of DeepMap, which does excessive definition mapping for autonomous autos, and this was at an undisclosed value. So, Nvidia you historically know as an AI developer for a {hardware}, however they’re more and more getting and realizing the significance of mapping out and being a robust participant throughout the stack.
Autodesk, one other THNQ index member, made an fascinating acquisition early within the 12 months with its one billion acquisition of Innovyze, representing an enormous alternative for sensible water infrastructure modeling and AI simulation for sensible cities. For each water administration for human consumption, waste administration and agriculture, however more and more vital for the impression of world warming as we have seen play out this 12 months. Lastly, considered one of our cyber safety index members, Rapid7 acquired IntSights Cyber Intelligence, to cowl extra exterior threats for enterprise shoppers utilizing AI capabilities.
Of the 5 takeout affords up to now this 12 months for the THNQ index, 4 have been from non-public fairness traders. By all companies have been more and more energetic this 12 months, buying cloud-based property as digital transformation takes maintain accelerated by the pandemic. However non-public fairness companies, shopping for property like Cloudera, a number one supplier of enterprise information analytics and machine studying instruments, and Talend, a frontrunner in AI information integration, highlights the significance of constructing out the subsequent technology of AI structure.
Extra lately, Cornerstone OnDemand, an HR administration SAS participant, was acquired by Clearlake for practically $4 billion. These information analytic suppliers are key gamers in constructing mission vital information pushed functions, the safety, governance, scale and management entry throughout the information life cycle. For the reason that alternative for AI functions are deploying at a speedy charge, a few of our index members need to ramp up their investments as a personal firm, outdoors of the scope of the non-public or public eye. We might not be stunned to see a few of these corporations return in just a few years with accelerated progress profile and market main positions within the AI ecosystem.
Most notably, THNQ index member, Microsoft, acquired fellow index member, Nuance Communications, for over $19 billion at a 23% premium. As Jeremie talked about earlier, Nuance has been a THNQ index member since exception and can also be a member of ROBO and HTEC indices. Nuance has been a serious success as a pioneer and conversational AI and pure language processing for the healthcare house. Protecting each the medical setting and doubtless extra so stepping into diagnostics and different improvements. They’ve an estimated 60% of market share, however that they had been buying and selling comparatively flat.
Microsoft CEO has referred to as out healthcare as probably the most pressing software, and so they have been working with Nuance for a few years. This acquisition places them instantly within the sport to enhance healthcare outcomes and automate the laborious administrative burden on our healthcare system. Now, I’ll move issues on to Lisa Chai who will stroll issues or stroll by means of in regards to the enterprise funding setting.
Lisa Chai:
Thanks, Zeno. It has been fairly a 12 months up to now in enterprise funding market. Enterprise funding hit new highs with 156 billion within the second quarter alone, with a mixed complete of 288 billion for first half of the 12 months. Variety of exits, whether or not it is by means of an IPO, direct itemizing, M&A, SPACs are up over 109% 12 months over 12 months. We get loads of questions on what we take into consideration SPACs typically. And we predict that SPACs are right here to remain. It continues to shatter information with virtually 400 SPAC filings, to this point surpassing final 12 months’s figures.
We’re seeing the standard of the businesses through SPAC even have elevated previously 12 months. So we imagine that not all SPACs are created equal. So, in lots of instances there are some good alternatives in case you spend the time to dig just a little deeper into their fundamentals. Investments in robotics slowed barely this 12 months, however general continues at a wholesome tempo after an enormous funding 12 months, final 12 months.
Thus far, in 2021, industrial robots look to be in a vibrant spot with factories and warehouses investing of their services, as demand for e-commerce continues at a speedy tempo. This 12 months, it appears to be like just like the 12 months for well being tech and fintech enterprise funding. We’re seeing elevated deal exercise in these sectors, as lots of them are utilizing subsequent technology AI capabilities. After which we predict there will be continued enterprise funding shifting into this house.
China continues to say no enterprise participation as a consequence of a difficult panorama of laws. Our analysis signifies that it’s down round 20% from final 12 months, and we do not know when it’s going to recuperate. However long term, we imagine that China will come again and they are going to be an energetic participant once more. One of many largest IPO corporations to debit this 12 months, that’s in enterprise AI, is UiPath, at 31 billion valuation. And that got here shortly after elevating 750 million early within the 12 months in non-public funding.
In the meantime, information intelligence supplier, Databricks, raised enterprise funding of 1.6 billion on the 38 billion valuation and Rivian raised 2.5 billion in enterprise funding this summer season at an $80 billion valuation. You will have heard of Rivian, they’re an electrical car producer and their rumored to go public, someday this fall. So, it is undoubtedly an thrilling time to be an EV investor.
There’s another actually wonderful revolutionary corporations which have gotten funding this 12 months, throughout expertise and digital well being. I am going to spotlight just a few. Mollie for instance, is an the Amsterdam primarily based firm, utilizing APIs to combine funds into enterprise companies. They usually’re at the moment valued at 6.5 billion. We predict Mollie is without doubt one of the most beneficial fintech corporations on the market on the planet. Most lately they raised $800 million spherical to assist fund the subsequent section of progress. The corporate is now processing over $24 billion in funds, up 100% 12 months over 12 months. After which we anticipate the corporate to go public probably someday in the course of subsequent 12 months.
Basically, we anticipate to see much more fintech offers within the enterprise market as digital spending by shoppers rises. The opposite one I like to spotlight is Ledger. Ledger is one other fintech firm, however in a digital asset class, with its {hardware} pockets to handle your crypto property. Ledger is predicated in France and so they simply raised virtually $400 million in funding with a $1.5 billion valuation, so it is an organization to look out for.
In the meantime Noom, is a digital well being firm and so they lately raised $540 million. It is an AI powered weight reduction app producing over 400 million revenues, greater than double the revenues from a 12 months in the past. With 45 million downloads and in 100 nations, the corporate is seeing loads of success with their personalised app the place AI can analyze the consumer’s behaviors and it may additionally reveal sure information factors on assembly your weight reduction milestones. So undoubtedly one other firm to look out for.
And to go just a little bit deeper into healthcare funding, with COVID-19 disruptions fostering the necessity for advert house and distant affected person care fashions, each current and new entrance are seeing large funding in adoption. Simply within the first half of this 12 months alone, digital well being funding is close to 15 billion and continues to outpace final 12 months’s determine of 14.7 billion.
I simply need to spotlight the highest 5 classes the place the enterprise funding is in Telemedicine at, 4.2 billion. Wellness at 1.7 and medical well being app often known as Digital Remedy is at 1.6 billion and Analytics at 1.5 and Scientific choice assist at 1.1 billion. In the meantime, on the subsequent slide, AI investments proceed to soar. In line with CB Insights, in second quarter, we noticed $20 billion deployed to 550 AI energy startups, which is one other funding file. This 12 months, we noticed extra $1 billion valuation corporations and ever within the historical past. There are about 24 AI unicorns, simply within the second quarter of this 12 months alone. AI exits additionally proceed to set a brand new file growing 125% 12 months quarter over quarter. So searching, we actually anticipate this AI funding setting to proceed at a file tempo. Now I’ll flip this over to Jeremie after which we’ll most likely take questions.
Jeremie Capron:
Thanks, Lisa. Fast reminder, you’ll be able to ask your questions by utilizing the Q&A field on the backside. We have now just a few which have are available in. I see there is a query across the particular expertise sectors that the portfolios present publicity to. I am going to clarify just a little bit about ROBO after which I am going to ask Nina to speak about HTEC, and Lisa, maybe you are able to do the AI portfolio. However primarily our funding methods share that in frequent, that we attempt to present publicity to the whole worth chain of expertise disruption. So, if you concentrate on robotics and automation, and the robotic portfolio, right here we’re trying on the suppliers of flip key automation options for particular vertical industries, manufacturing unit automation, in fact, but in addition take into consideration warehouse and logistics automation and the gear that goes into achievement facilities for e-commerce.
Take into consideration the software program spine for the automation of warehouses and issues like that. We’re healthcare, in fact, and right here it is about surgical robotics. It is in regards to the automation of hospital workflows. Take into consideration pharmacy automation and issues like that or the lab gear for pattern administration or the genomic evaluation. After which we take a look at the meals and agriculture sector. I discussed Raven, that is being taken over by CNH. Right here it is in regards to the precision farming. It is in regards to the expertise that goes into the manufacturing of meals and drinks. We’re shopper as properly. Autonomous methods, so take into consideration autonomous autos, autonomous drones, and issues like that.
It is about functions however it’s additionally in regards to the expertise and infrastructure that makes it doable. In the case of robotics and automation, we’re speaking about sensing, FLIR that I discussed earlier is a frontrunner in thermal sensing. We’re trying on the computing and the businesses that present the semiconductors and the compute energy for the brains of those automated methods. After which we take a look at the actuation, which is how the methods work together with the bodily world and form of componentry and the mechanical components that make robots.
Actually, once more, the concept is you cowl the whole worth chain as a result of the components of the worth chain the place the worth is created, or the expansion speed up, modifications over time. And we need to be sure that we are able to seize that in a means that gives comfy return and danger profile. Nina, why do not you discuss in regards to the the sectors within the HTEC portfolio?
Nina Deka:
Certain. Yeah. And just a bit little bit of background with our historical past with ROBO. ROBO has healthcare as considered one of its sectors. And what we noticed in the course of the 5, six years that that index was operating was there was a lot disruption taking place in healthcare alone that we believed it required its personal index, its personal technique, therefore why we launched HTEC. So once we look throughout the HTEC universe, what we’re attempting to do is present traders with publicity to the entire areas in healthcare that we imagine symbolize the subsequent decade of progress. There are such a lot of disruptive areas.
So we have 9 totally different subsectors. They embody robotics, telehealth, genomics, diagnostics, medical devices, precision drugs. These are all of the areas that we imagine symbolize all of the disruption that is taking place. And I suppose there are non-HTEC healthcare indexes which are on the market, however the place we’re distinctive is that we aren’t solely centered in genomics. We aren’t solely centered in biotech, for instance. We’re not solely centered telehealth. We have now this broad vary the place we solely choose the market and expertise leaders throughout the board. And in doing so we’re not solely offering publicity to those totally different areas, however as I discussed earlier there’s, there’s a lot exercise taking place, for instance, in diagnostics the place they need to leverage all the expansion taking place in precision drugs and new therapeutics. And they also’re going after that from an M&A standpoint.
A whole lot of these corporations all through the HTEC index companion with each other throughout subsectors. So when there’s one thing actually new and thrilling taking place like actually most cancers detection, it is not simply the genomics corporations that profit from it, however it’s additionally our precision drugs corporations and our course of automation corporations. So by having this diversification throughout a number of totally different subsectors, you get to essentially leverage the expansion that is taking place from all these totally different revolutionary areas. Let’s have a look at, Lisa or Zeno, do you guys need to discuss just a little bit in regards to the expertise methods throughout THNQ?
Lisa Chai:
Yeah. I may cowl this. So with THNQ, we’ve got 11 subsectors and it’s best to take a look at it as we’re actually attempting to purpose to seize the whole ecosystem of synthetic intelligence. We have now two classifications the place we’ve got the infrastructure and the functions. So in infrastructure, these are corporations which are enabling and creating AI, corporations within the semiconductor subsectors, corporations within the cloud and information infrastructure. And these are corporations which are actually enabling the optimization and functionality of AI functions for organizations.
And on the appliance facet, we’ve got subsectors just like the e-commerce and enterprise course of. And it is actually past simply bettering the workflow and automation of an enterprise, but in addition serving to enterprises extract clever insights to allow them to have interaction with our clients, giving that personalised expertise like e-commerce subsectors. Throughout the fintech, which I talked lots about within the enterprise funding phase, the place you will see the fintech corporations both within the e-commerce with a cellular cost or on-line market, otherwise you’ll additionally see within the enterprise course of utilizing synthetic intelligence to stop a fraud from taking place. So you will get the fraud alerts, bank card corporations trying on the credit score scoring. So, you are seeing a number of the functions and capabilities of AI being leveraged and being utilized by the enterprises in these subsectors.
Jeremie Capron:
Thanks, Lisa. Let’s transfer on to the subsequent query, which is round what are probably the most enticing areas in our methods for future M&A. And I feel right here, once more, we are able to deal with the three portfolio individually and I am going to kick off with ROBO. In robotics automation, we predict that proper now there is a candy spot that’s logistics and warehouse automation. And that is actually pushed by this phenomenal acceleration in e-commerce we noticed, not solely in the course of the pandemic, however actually over the previous decade or so. You’ve got bought giants like Amazon and Alibaba or JD in China which are setting the bar actually excessive, not just for their very own operations but in addition for the whole trade. And so each firm that wishes to compete with the likes of Amazon, Alibaba or JD, actually need to step up when it comes to their use of automation to have the ability to match the efficiency of an Amazon supply inside typically only one enterprise day.
And so we discover loads of curiosity in corporations that may present the logistics automation options. It goes from materials dealing with, shifting packages inside a warehouse to autonomous cellular robots that may try this. The software program corporations, simply the suppliers of software program options to automate warehouses after which the expertise infrastructure round that. From sensing to manage methods, to compute, that is very, very popular. And so as we speak, logistics and warehouse automation represents about 12% of the worldwide index and we’ve got slightly below 10 corporations in there. What about healthcare expertise? Nina, do you need to deal with that?
Nina Deka:
Certain. I imply, there’s simply a lot. There’s so many areas proper now that corporations need publicity to. I suppose, one solution to reply that is to have a look at… We titled our report observe the cash, however in healthcare I usually consider observe the medical error or observe the loss of life charge or observe the prices as a result of healthcare prices are rising at an unprecedented charge. The inhabitants is growing old at a tempo that’s unsustainable when it comes to the variety of healthcare staff that we’ll have over the subsequent couple of many years. We have got extra healthcare staff, medical doctors, and nurses retiring than we do new individuals coming into the system.
Areas the place you anticipate to see extra M&A funding are alternatives for automation. Anywhere the place somebody’s doing one thing manually is one thing like, take a look at the pharmacy the place human beings are nonetheless placing capsules into particular person containers to distribute to pharmacy clients. That may be automated. There’s robots that try this. There’s an organization referred to as Omnicell within the HTEC and ROBO index that gives that service. In the event you take a look at medical errors, the third main reason behind loss of life within the US, there are such a lot of methods to enhance that by means of higher AI. You’ll be able to additional help what a doctor does and assist them with their medical decision-making with AI components software program, with higher information analytics.
We will take a look at complete populations and decide some individuals who have not been to the physician shortly, may need to get to a physician. And that means they’ll have preventative care that can assist hold them from having greater prices down the street like diabetes and coronary heart illness. We lined it in our report, however Boston Scientific has had loads of exercise happening. They need to get additional automated and higher procedures and capabilities for the cardiology house. They made a number of acquisitions there, PREVENTUS is a $1 billion acquisition.
We’ll see extra funding in wearable gadgets. Something that helps corporations and med tech firms be extra interactive with the buyer. Teladoc made one of many largest digital well being acquisitions final 12 months once they acquired Livongo 16, $18 billion. And that was a means for them to be actually within the pockets of individuals with diabetes, hypertension, and weight administration to assist present teaching companies. So something that is going to assist drive wellness, to maintain individuals properly earlier than they get sick, assist drive higher affected person expertise, higher shopper expertise, after which even have with trendy procedures, get them much more modernized and digitized.
Jeremie Capron:
Lisa, do you need to deal with enticing areas for M&A in AI?
Lisa Chai:
In AI, I feel you are seeing this subsequent technology of cloud companies taking place. And cloud is essential as a result of with out the type of the brand new trendy structure that is been at the moment being constructed and I feel that is why you are seeing this form of the large acquisitions by the PE agency. That is to take a few of these corporations and type of roll it up. It could be actually fascinating to see what the type of the subsequent section of progress, these corporations going to face.
However you are going to see loads of, I feel, consolidation and acquisitions across the cloud expertise suppliers. Whether or not it is on the information analytics facet or whether or not it is the combination and even enablement of multi-cloud options. So you are going to see loads of these new terminology that is taking place. And that is all crucial to the AI ecosystem as a result of you’ll be able to’t actually run on actual subtle superior AI algorithms on a standard older expertise infrastructure. So, I feel that a few of the M&A exercise will proceed on that facet and clearly having that SAS kind of enterprise mannequin as very enticing.
Jeremie Capron:
Thanks. We have now a query round portfolio development and why not enhance allocations to the highest well being dozen or so holdings, corporations you imagine are robust long-term advert efficiency. This can be a crucial piece of our funding technique. The place, as I stated the portfolios present publicity to the most effective at school corporations which are on the forefront of this expertise revolution.
By design we have determined to not focus or bets on a handful of corporations and reasonably present diversified publicity to the whole worth chain. And so the way in which we do that’s by combining this analysis route and collection of the most effective corporations with the advantages of index investing when it comes to the danger administration of your portfolio. And so we, roughly equal weigh our positions. It is not precisely equal weighted as a result of we’ve got a scoring system that can drive the place measurement to some extent. However on the finish of the day we’ve got place sizes that vary from slightly below 1% to simply below 2% on the excessive finish.
We predict that is an excellent recipe when it comes to offering the publicity to the theme and expressing a bullish view on robotics, AI and healthcare tech. However on the similar time delivering it in a portfolio that has a pretty danger profile. Which means it will take you from level A to level B in a comparatively smoother means than in case you take concentrated wager.
So each investor may have a special urge for food for that type of technique, however we predict up to now the outcomes have been fairly passable. There’s yet one more query on machine studying and perhaps Lisa you’ll be able to take that. Some corporations develop machine studying capabilities in-house and others use machine studying platforms to supply their companies. Do you see any distinction when it comes to the aggressive benefits that present?
Lisa Chai:
It is fascinating as a result of there are loads of opinions round that and I feel it actually will depend on the enterprise answer that you simply’re offering. We do know for positive that there’s a scarcity of AI expertise. Some corporations proper now, typically, the trade is basically pivoting at this level the place we’re pressured to undertake a few of these API options or off the shelf AI functions and packages. So a few of these algorithms are going to be packed collectively the place it is simple to deploy and simple to make use of and fast to deploy. And that is as a result of we do not have sufficient information science expertise on the market.
So there’s been this large type of coaching that is taking place with the software program engineers and attempting to steal loads of expertise away from one another, so that is what we’re seeing. It’ll be fascinating whether or not when it comes to the precise in-depth evaluation of the expertise, whether or not in-house is basically higher than form of the off-the-shelf. That is going to be fascinating to see that. However proper now I feel you do not have a selection apart from whether or not you need to spend so much of assets round capabilities, in addition to constructing the information science expertise.
Jeremie Capron:
All proper. Properly, I feel it is time to wrap up. So, I need to thank all people for becoming a member of us as we speak, and we sit up for speaking to you once more subsequent month.
