As most of us are aware globally we are currently going through the fourth industrial revolution. It is perhaps more accurately described as an emerging technologies revolution characterised by a blending or merging of the physical, digital and biological worlds.
It is epitomised by emerging technology breakthroughs in a number of areas including robotics, artificial intelligence, blockchain, nanotechnology, quantum computing, biotechnology, The Internet of Things, 3D printing and autonomous vehicles amongst others. Interestingly these are the sectors that our fund invests in!
Both the pace of change and the depth and range of it is extraordinary and it will transform the world into one that is unimaginable to us mere mortals.
The word disruption is on everyone’s lips. Anyone would think it is a new word. Of course we have always had disruption. The difference this time is that the speed of it and its breadth is astonishing.
As a result of this disruption it is more important than ever to accept, embrace and anticipate change. Why? Because if we do not prepare in advance for the rapid changes that are engulfing us all we will get left behind literally overnight.
The challenge as I see it is that most businesses especially large businesses do not act quickly enough. They tend to continue reaping the benefits of a successful and profitable business model even though it is obvious that its days are numbered. Just look at some examples in the IT world. IBM, Microsoft and arguably Apple in the future. All 3 companies have been dominant for many years but none of them have changed quickly enough. Apple will be the next one to shrink in size because it hasn’t created any innovative new product since Steve Jobs died. Its users are getting fed up with its high pricing and its planned obsolescence model epitomised by its deliberate slowing of its devices’ batteries after just 2-3 years’ use. It is surviving on its existing model and it will inevitably get swept aside by its competitors unless it can innovate and disrupt again.
Large businesses are like oil tankers. Apparently it takes 2 miles for an oil tanker to turn around whereas a rowing boat will take 2 feet! You need to change direction very quickly these days. Take Amazon as an example. Jeff Bezos, the founder of Amazon, claims that he re-invents Amazon every day. This is a man and a company that practices kaizen which is a Japanese term for constant and never ending improvement. Another business leader, Elon Musk, of Tesla fame is of the same mould. These are leaders of innovative and disruptive businesses that are truly world beaters. That’s why these are 2 shares that form part of our CCM Intelligent Wealth Fund.
The fund management industry is ripe for disruption. Why? Because it is an extremely wealthy, profitable and greedy industry that has served investors poorly for many years. Investigations and reports by the Financial Conduct Authority over the last 18 months are testament to the fact that most fund management companies, especially active fund managers, charge excessive fees and produce consistently poor returns that are typically 2% p.a. lower than their benchmark stockmarket indices. It is truly an indictment of a fat, complacent industry that is ready for change.
Active fund managers are already under threat from passive fund managers who are increasingly taking large amounts of market share away from them due to their lower fees and usually better investment performance. The example of Vanguard, a US mutual fund manager that specialises in passive funds, is astonishing. The company was founded by the legendary Jack Bogle just 40 years ago and has already become one of the largest fund managers in the world with over $5 trillion under management.
There is also the threat of robo advice which is gradually making inroads into both active and passive fund managers’ market share. Robo advice is likely to transform itself into true robotic advice maybe in the form of avatars or holograms that deliver advice using machine learning. That will drive down existing fund managers’ fee dramatically and make their business models unsustainable.
There are already tools being developed, and at least one marketed in the US, that allows DIY investors to even cut out passive fund managers and allow them to become their own passive fund managers!
So the writing is on the wall for large active fund managers. Most of them will either fail, merge or downsize in the future because, like oil tankers, they will be unable to change direction quickly enough.
So why leave anything to chance? Why not invest your money with an innovative and disruptive active fund manager. One that is committed to achieving excellent investment returns for its investors. One that puts investors’ interests first. That fund manager is Minerva Money Management. The fund is the CCM Intelligent Wealth Fund. You know it makes sense.
