The first quarter of 2018 saw market volatility pick up. Fears over a potential trade war sparked volatility, leading to the unwinding of momentum and managed futures funds.With the market volatility, the FANGMAN club (comprising tech giants Facebook, Amazon, Netflix, Google, Microsoft, Apple and Nvidia) saw declines indicating growing risk aversion to leading mega cap stocks. LionGlobal Disruptive Innovation Fund is more diversified than a highly concentrated active fund with 100 disruptors. By managing concentration risk (the risk of a few stocks making up a large part of a portfolio) the Fund is less affected by the impact of the decline of a few stocks.The LionGlobal Disruptive Innovation Fund invests in more than FANGMAN stocks. We see the trend of disruption happening across the world. Disruptors are found in China and Japan, and we remain excited by the growth potential we see happening across the world.Launched at an NAV of SGD1 the LionGlobal Disruptive Innovation Fund SGD Class A NAV stands at SGD1.188 on 4 May 2018.

News About Disruption Around The World
Uber’s partially-autonomous cars prove problematic

• Recent fatal accident has raised questions about the firm’s technology
• MIT Tech Review points out that the driver’s distraction is “an indictment of the car’s technology” and the LIDAR sensors in the Uber vehicle should have identified the pedestrian even in the dark
• Alphabet subsidiary Waymo, in their development of self-driving cars, focuses exclusively on fully autonomous cars

Source: CLSA Research, MIT Tech Review (March 2018); Image credit: REUTERS/Natalie Behring.

Shenzhen-based drone maker DJI valued at US$15 billion

• DJI seeks to raise US$500m – US$1b in a new round of funding, a 50% increase since its last valuation at US$10m in 2015
• Research firm IDC estimates spending on drones to reach US9b in 2017 and to grow 30% annually over the next 5 years
• Drones have been used in industries including filmmaking, advertising, agriculture, energy, construction and emergency response
• IDC expects utilities and construction industries to be big spenders in the space and in November 2017, DJI unveiled FlightHub which allows enterprises to easily manage a fleet of drones

Source: IDC, CLSA Research, March 2018, Image credit: DJI press kit

Questions About Disruption
How is the LionGlobal Disruptive Innovation Fund different from a technology fund?

The LionGlobal Disruptive Innovation Fund is not a technology fund. It is a global equity fund with a globally-diversified portfolio of 100 stocks managed by a disciplined, factor-based approach. Technology may be an enabler, however we believe looking at disruption from a technology perspective is too narrow a view. Furthermore, technology itself is not immune from disruption – there will be winners and losers in the new age of disruption.

What are examples of well-known companies that are NOT in the universe of the LionGlobal Disruptive Innovation Fund?

HCL Technologies is an Indian company in the Nifty50. The firm is an IT services company, providing outsourcing solutions to a range of sectors including Financial Services, Consumer services, Life Science, Healthcare, and Manufacturing. The firm provides IT solutions to users and works with other firms to license intellectual property. While the firm is a well-known IT outsourcing player, it does not attempt to change the way an industry operates, hence, the firm is not in our universe.

Nokia is a Finnish company that is in the EuroStoxx 50. Formerly a titan of smartphone manufacturers, the firm subsequently sold its smartphone business to Microsoft and refocused its attention to network equipment. While the firm remains well-known among technology companies, and has a network infrastructure business, we do not see a culture of disruption and is not in the universe.

Toyota has been the pioneer of hybrid cars and it had developed Prius, one of the first full hybrid cars in the market. However, we think Toyota is not a disruptor as it has a large base of ICE (internal combustion engine) cars. It is not in Toyota’s DNA to build EVs (Electric Vehicles) or cars that are out of the box. With all its established supply chain partners, distribution network, after sales infrastructure, it is going to be an uphill task for Toyota to transform itself into a Disruptor.

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