Double disruption
Mark Heslop, Richard Watts, Brinton Johns and Guy de Blonay discuss how Covid-19 has accelerated existing trends and how this ‘double disruption’ shapes the way they assess investment opportunities and risks.
‘Disruption’ was a hot topic long before most of us had even heard the word ‘coronavirus.’ From geopolitical dislocations, to the discourse about the relationship between business, society, and the environment, to the dramatic challenges to old business models from newer, technology-enabled players, the world was already rapidly changing. Then came the most serious global public health emergency in living memory. Here is how four of our fund managers approach this ‘double disruption’.
What are the key drivers of disruption in your markets?
As a small and mid-cap UK investor, digital innovation has been an important area for Richard Watts (Head of Strategy, UK Small & Mid Cap). IPOs for disruptive UK companies like RightMove and Just Eat provided an early hint of what was to come globally. In Richard’s view, the most exciting and innovative opportunities in the UK are private, unlisted companies that use technology to compete on a global scale. These businesses are led by aggressive price competitiveness, a big reason behind the muted inflation seen globally over the last decade, two trends he expects to continue. Richard also noted the strong ‘innovation ecosystem’ in the UK, from world-class universities to leading financial technology and e-commerce companies.
As European investor, Covid disruption has increased the potential of existing winning business models, said Mark Heslop (Fund Manager, European Growth). The Covid crisis has highlighted the value of digital solutions and in Europe a number of businesses have now adopted new technology to drive supply chain efficiencies as well as customer solutions. Companies like RELX or Experian, for example, show how proper investment in the right technology has enabled them to process vast amounts of data in order to provide better solutions and services for their customers. In Mark’s view, existing companies with strong management teams and business models that are prepared to invest in new technology and innovate can become even more resilient and cost competitive.
In Brinton Johns’ (Co-founder and investor at NZS Capital, LLC) view, crises accelerate existing technological trends. Brinton said we are in the transition from the Industrial Age to the Information Age but only a very small part of the economy has yet made the shift to a digital mindset. He invests specifically through the lens of disruption and views events like Covid-19 as trend accelerators. Zoom is a good example. We’re all using Zoom now but even pre-Covid, Gartner, a leading IT consul