SYDNEY: 3 August, 2023 – Insync Funds Management believes Artificial Intelligence (AI) has reached an inflection point, brought about by a new phase in the creation of generative AI and large-language transformer models such as ChatGPT. It sees this new leap forward in AI as highly disruptive to most industries, and as such will have a profound impact on where to invest, and importantly where not to.
‘We are heavily engaged in deep specialist research to gauge who will be empowered, what to avoid, and where the most significant value and differentiation lies,’ says Insync CIO, Monik Kotecha. ‘One key area of more immediate benefit is in data.’
RELX is one global company in the Insync portfolio that has a distinct data advantage, making it a major beneficiary of the acceleration of AI.
A global provider of information-based analytics and decision tools, RELX provides products that help researchers advance scientific knowledge across medical, legal, financial services and government industries and sectors.
‘What RELX does so well is gather, analyse, and deliver valuable knowledge and insights to businesses and professionals across industries globally, empowering people and organisations to make better-informed decisions.’ Mr Kotecha said.
The company has been using machine learning natural language processing for well over a decade and has been experimenting with generative AI for over 18 months. It employs 10,000 technologists spending about $1.6 billion a year on technology alone.
‘Similar to one of our other holdings, Adobe, it possesses multiple gargantuan databases that result in reliable and trusted sources of data its customers can depend on,’ Mr Kotecha said.
‘Like all companies in our portfolio, both Adobe and RELX are highly profitable companies based on their Return On Invested Capital (ROIC), have a long runway of growth, modest levels of debt, substantial R&D, and are generating prodigious amounts of cash flow year after year,’ Mr Kotecha said.
‘While investors are fretting over when interest rates will peak, and the impact on both the economy and company earnings, a select group of companies often deliver excess relative returns versus the benchmark again and again,’ he said. ‘This is especially so during historical periods of monetary tightening and general gloomy headlines, such as we are experiencing today.’
Results from such companies, even in the current environment, should not be surprising he said. ‘We find they often maintain and even strengthen their strong competitive advantages during challenging times, and this enables them to consistently generate economic value even as the cost of capital is rising.’