A N D B E YO N D A N e w Te c h n o l o g y Pa r a d i g m. January 2017 Thought Leadership Copyright Symphonic Alternative Investments, LP

Transcription

1 A N D B E YO N D A N e w Te c h n o l o g y Pa r a d i g m January 2017 Thought Leadership Copyright Symphonic Alternative Investments, LP

2 2017 and Beyond: A New Technology Paradigm Within the next decade We will experience a fundamental overhaul of the way we think about energy, transportation and manufacturing. Major disruptions to the present (old) way of life will come from a combination of technological advances and cost reduction. The way we think about global and emerging markets will also change. Peter Trofimenko, CIO, Symphonic Alternative Investments 2

3 We are on the Verge Of a Technological Revolution Major disruptions to the present (old) way of life in the next decade include (in alphabetic order): 1. Artificial Intelligence / Machine Learning 2. Automation and Robotics 3. Autonomous Vehicles 4. Big Data / Open Data 5. Electric Vehicles 6. E-Money / e-finance 7. Energy Storage / Batteries 8. Sensors / Internet of Things 9. Solar Photovoltaic (PV), wind and geothermal power generation 3

4 Artificial Intelligence AI seeks to learn what its users want and how they want it. Media is just one example. Since May 2014 US corporate earning reports published by Associated Press are produced by AI machines, not human journalists/analysts CNN, The Wall Street Journal, Facebook Messenger, Google, several other news organizations are already using bots and some level of automation to deliver news through the platform and customize content and news flow Yandex (a web search engine/portal/media) has now special media unit that produces ALL news stories by AI machines, not human journalists, and you would not know the difference! 4

5 Automation and Robotics China aiming to become one of the top technological industrial nations within just a few years. Robot density: 66 robots for every 10,000 employees (global average) China: approximately 49/10,000 now, targeting 150/10,000 by ,000 to 650,000 new industrial robots will have to be installed throughout China Approx. 254,000 units were sold in the global market during

6 Automation and Robotics Precision farming, factory of the future and more opportunities Automation is manifesting itself not only in robotics. Precision farming: automated tractors, drones, automated seeding and automated fertilizer applications is being rapidly developed Factory Of The Future (aka Lights Out factory) New layouts and completely new automated technological processes, projected to provide more than $500 billion in combined savings for manufacturers and customers by 2030 Changing nature of employment Rise of robotics does not necessarily lead to the overall loss of jobs. Employment opportunities continue to exist. 6

7 Autonomous Vehicles While ride-sharing companies are disrupting private and public transportation, cars are a hugely inefficient use of assets. Three dimensions of this new revolution: 1. Energy Efficiency Internal Combustion Engine efficiency 17-21% vs Electric Vehicle efficiency of 90-85% 2. Asset Utilization 4% for car owned vs 80-90% for car shared 3. Autonomy capability From owner driven to computer driven Is the market ready for self-driving cars? 57% of consumers globally trust driverless cars higher in emerging markets (according to a recent study) 7

8 Electric Vehicles ( EV ) By 2020 EV will be priced lower and 10x to 100x cheaper to maintain than an internal combustion engine ( ICE ) car. Reasons why EVs are massively disruptive: 1. Electric Motor is 5x more efficient than Internal Combustion Engine. 2. EVs are 10x cheaper to charge/fuel. 3. EVs are 10x-100x cheaper to maintain Gasoline car: 2,000+ moving parts vs. EV s EV electric motor is far more powerful than ICE. Tesla P90D accelerates faster than $1 million gas supercars from Ferrari, McLaren, Lamborghini, Pagani and Porsche, i.e. the cars that cost ten times as much. Just like film cameras gave way to digital cameras it will make no sense for anybody to own a vehicle that is more expensive to buy, more expensive to maintain, and that has less power than EV. When you get a Porsche performance for a Buick price, neither Porsche nor Buick will be able to compete! 8

9 Energy Storage/Batteries Global Battery manufacturing capacity is doubling in Tesla is opening its Gigafactory in Nevada Chinese auto and battery maker BYD matching Tesla s factory size Additional battery capacity planned by Korean chemical company LG Chem, Taiwanese electronics Foxconn, vehicle manufacturer Nissan, Samsung SDI, TDK, Apple, Bosch, VW, etc. Lithium-ion battery costs dropped 16% p.a. in and 17-18% p.a. in By 2020: only $36.8/month ($1.20/day) for a full day of electricity storage New capacity addition will accelerate cost curve further! 9

10 Solar Disruption Impending cost parity of solar production with electricity transmission Solar power today is at or below grid parity in hundreds of markets globally. By 2020: massive technological/financial breakthrough in the way we generate power in the world! Depending on the cost of capital, cost of unsubsidized rooftop solar power generation will be 4-5 cents kwh by 2020! By 2022: solar generation plus storage together will become cheaper than the cost of transmission! Lower cost will accelerate the demand for solar. 10

11 Technological Revolution in Summary We are on a cusp of major disruptions in energy and transportation. By 2025 we will see MORE CHANGES in energy and transportation than we have seen in a century since the invention of the gasoline/diesel internal combustion engine vehicle and the central electricity generating utility! By 2030 this revolution will be over: All new vehicles will be electric. All new vehicles will be autonomous (self-driving). Oil as transportation fuel and power generation fuel will be obsolete. Coal, natural gas and nuclear for power generation will be obsolete. 80+ per cent of parking spaces will be obsolete. Individual car ownership will start becoming obsolete. All new energy will be provided by solar, wind, geothermal and hydro power. 11

12 ~85% of the global economy is outside the United States! 15 largest economies by the International Monetary Fund (Estimates for 2016) Rank Country (region) GDP (Int$m) Share of Global GDP World 119,097, % 1 China 21,269, % European Union 19,748, % 2 United States 18,562, % 3 India 8,720, % 4 Japan 4,932, % 5 Germany 3,979, % 6 Russia 3,745, % 7 Brazil 3,134, % 8 Indonesia 3,027, % 9 United Kingdom 2,787, % 10 France 2,736, % 11 Mexico 2,227, % 12 Italy 2,213, % 13 South Korea 1,916, % 14 Saudi Arabia 1,900, % 12

13 Over 60% of the global economy is in emerging markets Emerging markets have become the largest contributor to global GDP by far 13

14 Debt to GDP by country (2015): Apples to apples: China s debt picture is much healthier than EU, US, Japan Public debt to GDP Private debt to GDP China 43.9% 195% 236% Euro area 90.7% 400% 491% USA 104.2% 197.2% 332% Japan 229.2% 243.1% 472% Total Debt to GDP Source: TradingEconomics.com 14

15 Projected annual returns based on Shiller PE: Russia Projected Annual Return, % based on Shiller P/E China % 30.3% -0.05% Projected Annual return, % Russia China Singapore India Brazil Australia Indonesia Italy Spain Netherlands UK Korea Sweden France Canada Mexico Japan Germany USA USA Source: Global Market Valuation 15

16 92% of all companies are listed outside the United States! Number of US-listed companies is the lowest since 1975 Source: Craig Doidge, G. Andrew Karolyi and René M. Stulz 16

17 Modern Technology Transcends National Borders Across political, regulatory, taxation, monetary and fiscal regimes Apple, Inc.: vast majority of sales come from the markets outside the United States, including China, Japan, Taiwan, Korea, Russia, Brazil and so on. It means that Apple is exposed to all the monetary, fiscal, tax, regulatory, political peculiarities of these markets much more than those of the United States. Volvo Cars: A Chinese company 100% owned by Geely. So into which bucket does Volvo fall: a developed markets bucket or an emerging markets bucket? Range Rover, Land Rover, Jaguar: owned by Indian company Tata Motors These stocks are listed in the United States, London, Frankfurt, Luxembourg, etc. Apple or Geely are only as much American or Chinese as they are owned by American or Chinese investors. 17

18 Our Opportunity Set No particular country or stock exchange is enough to benefit from the upcoming technological revolution Traditional classifications like developed or emerging markets are about to be shattered and should not represent investors criteria. We believe that investors should prioritize company fundamentals and build portfolios that include companies with: Sustainable competitive advantages Scalable business models High earnings growth rates Healthy balance sheets Attractive valuations 18

19 Our Investment Strategy Identify overvalued, undervalued or mispriced investment candidates from the universe of global markets Our scalable investment process is driven by fundamental judgment with systematic implementation based on expected returns, risk and transaction costs. We would be delighted to schedule a meeting or call to discuss our funds/strategies. Peter Trofimenko, CIO, & Brian Walker, CEO Symphonic Alternative Investments, LP 4250 North Fairfax Drive, Suite 600, Arlington, VA This document does not constitute an offer to sell any securities or constitute a solicitation of an offer to purchase any securities. Any offer to sell or solicitation of an offer to purchase shall be made only by formal offering documents, which will include, among others, a confidential offering memorandum, subscription agreement and related subscription documents. Such formal offering documents will contain additional information not set forth herein, which such additional information may be material to any decision to invest in the fund contemplated hereby. Each potential investor should read the confidential offering memorandum in its entirety and should carefully consider the risks, warnings and disclosures therein. 19