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Recent articles have called attention to the underperformance of hedge funds and other investment management firms, questioning whether the “golden era is now gone.”
Despite these dour prognostications, there are investment firms that are outpacing and beating the overall market. How do they do it? One strategy involves investing in secular themes, major trends that will unfold over multiple years and are more insulated from the near-term market volatility.
The advancement and adoption of new technologies, also known as technology diffusion, is a transformational and secular theme, not tied to market cycles. Evaluating the life stage of a given technology by assessing how many companies are investing in that technology (i.e., adoption), how deeply integrated into these organizations (i.e., penetration), and how these trends are expected to evolve over time. This analysis helps substantiate the speed or diffusion rate at which a technology’s use is growing, remaining whitespace in the market, and how those dynamics are expected to evolve.
Artificial intelligence (AI) / ChatGPT is a noteworthy example and has been a clear success story in 2023. However, there are other investable themes to consider. Digital advertising, cybersecurity, embedded payment and finance within business software, modernization of healthcare data ownership, and industrial technology also exhibit positive long-term trends.
At Stax, we are partnering with top performing funds and building a granular and bottom-up viewpoint of these technology advancements, the speed and breadth at which these technologies are being diffused across companies, the demand drivers underpinning growth, and the companies or providers that are best positioned to benefit from these dynamics.
Contact us to find out how Stax can support your team’s efforts.
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