In a recent report, Barclays expands on the appeal of smart cities to investors, but when it talks about actual funds that concentrate on this major opportunity in the making, the list feels short. When you scan Google, looking for funds that specialise in smart cities, the search results are even less relevant than normal.
Pictet may be changing that. It has revealed its UCITS-compliant Pictet-SmartCity fund, which it says: “Aims to capture the strong growth potential of companies finding smarter solutions to the challenges posed by rapidly increasing urbanisation.”
It describes the fund “as a global thematic equities strategy that aims to exploit the powerful trends driving urbanisation.” It says that “its objective is long-term capital growth by investing in companies around the world that are helping to develop the cities of tomorrow.” Maybe, if we could fast forward the clock all the way to tomorrow, we would have a better feel for which cities fall into that category.
Fortunately, Pictet did give us more details on what that means: It said that the companies it invests in will be active mainly, but not exclusively, in the following areas:
- mobility and transportation,
- real estate,
- sustainable resources management,
- as well as enabling technologies and services supporting the development of better urban environments.
Up to now, investing in smart cities via funds was usually less precisely targeted than the approach taken by Pictet. Barclays, for example, when it looked at smart city investment, talked about the Baillie Gifford Global Discovery fund, which it says “holds Tesla in its top ten holdings, and almost a third of the fund is invested in technology stocks.” It also cites The Artemis Global Growth fund which “also has exposure to a number of automotive and technology companies,” and Polar Capital Technology Trust which “also holds a number of the key players in the sector, including an 8.2% in Alphabet (the holding company for Google), which has a stake in Uber.”
It all feels rather hit or miss, not so much smart cities per se, but just tech – an example perhaps of how, up to now, investing specifically into companies that are enabling smart cities has largely been the preserve of specialist private investment vehicles.
But the speed with which asset managers embrace smart cities in important. Companies, and their CTOs, who are looking at this area, of ways to dovetail their own technology plans with smart cities, would benefit from seeing how funds are embracing this opportunity and the areas they are focusing on.
Pictet itself said that the fund will target three types of companies:
- those building the city — companies involved in the design, planning and construction of tomorrow’s cities, with a focus on efficiency;
- those running the city — companies that provide essential infrastructure and services for the day-to-day functioning of cities in a sustainable way;
- and those living in the city — companies that offer services and solutions for 21st-century urban living, including housing, working and recreational activities.
The manager of the strategy is Ivo Weinöhrl, CFA, Senior Investment Manager, who is supported by Lucia Macaccaro, Investment Manager. The team will adopt “the same active management process applied to all Pictet AM’s thematic strategies; high conviction portfolios composed of companies with high exposure to the theme.”
“Cities are having to adapt to manage rapidly growing populations while seeking to reduce their environmental impact. This is creating abundant investment opportunities for our clients” said Ivo Weinöhrl. “We believe that the new addition to the thematic franchise will offer an original investment proposition, underpinned by the powerful long-term trends of demographic change, economic growth, sustainability and technological progress.”