It typically takes 21 days to form a new habit – be that running, making rather than buying coffee, meditating in the morning or writing in a journal – before it becomes a regular part of our lives.
And after 30 days under lockdown in the UK Smith & Williamson’s Chris Ford said we’re going to be seeing permanent behavioural changes in both the economy and fund managers’ processes once the crisis is over.
Ford, manager of the £235.8m Smith & Williamson Artificial Intelligence fund, said that individuals, companies and managers investment models who are resistant to change will not get through this intense period of lockdown.
And this has particular implications for artificial intelligence (AI), Ford’s area of focus.
“When we look back at this [period] in two, three, four years’ time, what we’ll see is that this kind of change – which was probably happening anyway in respect to consumer and corporate behaviour – has been massively accelerated as a result of what we’re going through now,” he said.
Change which is being forced upon the public by the coronavirus pandemic is also changing consumer behaviour which Ford believes will be a long-term trend rather than a short-term event.
In addition, the types of companies that fund managers are going to hold in their portfolios is going to change and that is likely to move towards more resilient companies rather than those with big profits built into their models.
What has emerged from the coronavirus pandemic, according to Ford, is that businesses that implemented AI processes have been somewhat more resilient in the crisis, even for companies not typically associated with AI. A company like UK online supermarket Ocado.
Along with other grocers, Ocado soared in popularity among investors and has risen by 26.47 per cent in the month since the lockdown was announced on 23 March, as the below chart shows.
Performance of Ocado over 1mth
Source: FE Analytics
Ocado’s share price has risen as people have remained in their homes and sought to minimise their contact with others by having their shopping delivered, Ford said it would not have benefited so much if it did not have an exemplary e-commerce platform.
Indeed, Ocado is built on what Ford described as “an extraordinary tech platform which stands behind absolutely everything that the company provides to their clients,” which drew him to it before the outbreak reached the UK.
The point, Ford said, is that any company that hasn’t embraced the changes AI was pushing through before and “have sought to hide behind their kind of traditional modus operandi,” are going to have a hard time coming through this crisis, if at all.
Ford added: “We’re seeing this kind of almost extinction event where, on one hand, you have a group of companies that have those cultural characteristics [of embracing change], many of whom will be artificial intelligence to their core. And[on the other hand] a bunch of companies that just didn’t have that kind of change-mindedness.
“I think that's really what's kind of going on inside the inside the economy at the moment and it’s going to be interesting to see – when we come out the other side of it – who is left standing and who can rehabilitate more rapidly.”
The Smith & Williamson Artificial Intelligence manager said it cannot be understated the part that AI has already played in the current crisis , having first been identified by Canadian infectious disease software platform BlueDot as the outbreaks in China emerged.
“I think there are some things that we can we can assert with good confidence here,” said Ford. “The first is that the long run opportunity for artificial intelligence platforms is completely unchanged.
“In fact, I think there’s a good case to be made in some cases that the benefits of artificial intelligence platforms are being demonstrated right now, as a result of the business continuity that’s provided through some of the companies in which we invest in as a result of the use of AI platforms.”
Coming into the crisis Ford said he’d made very few changes to his 38 holdings over the past six months, adding that he felt no differently about these companies today mid-crisis than he did at the start of it.
However, Ford said he had reduced the fund’s cyclical exposure, selling out of some companies such as academic publisher RELX plc who due to the current social distancing measures cannot hold their usual exhibition conferences.
Performance of fund since launch
Source: FE Analytics
Ford co-manages the Smith & Williamson Artificial Intelligence fund with Tim Day, which has made a total return of 72.33 per cent since launch in 2017.
It has an ongoing charges figure (OCF) of 0.82 per cent.