INVESTMENTS & PENSIONS
We ’ ve said before that AI is an overnight sensation that has been more than a decade in the making and its influence on the future of the world is of course only beginning to take shape , but is it being overhyped ? It reminds me of the very recent clamour that we saw from ESG , with every fund group or investment provider quickly realising that they had to re-label their existing range to reflect the need for “ sustainability ” in order to remain relevant in the wider marketplace . Of course , accusations of green washing are now commonplace and take-up of ESG investments has been almost as poor as a lot of the performance .
Investors ignore these themes at their peril , but is attention being drawn away from other opportunities that make less public appeal ( because no one ’ s come up with a catchy name perhaps )? At a recent presentation we shone the spotlight on cybersecurity as one such opportunity which has recently started to outperform the S & P 500 see chart below .
There are no household names within the cyber sector just yet , but with the growth of AI and no less than 54 general elections scheduled to take place around the world this year , the need for cybersecurity is only growing . As a sector it is now included as part of a couple of defence ETFs that would otherwise only have considered more traditional ( and less palatable to investors ) companies that are involved in weapons manufacturing . Cybersecurity is coming of age as an essential part of our lives but its runway of opportunity seems , to my mind , to have a long way to run yet .
WHAT HAPPENS WHEN YOU MAKE AN ILLIQUID ASSET CLASS LIQUID ?:
On January 11th this year , Bitcoin ETFs were given the green light to trade in the US by the Securities & Exchange Commission which effectively allowed investors to invest in the cryptocurrency without the need to physically buy and hold it themselves . In other words , the ruling made a previously illiquid asset , liquid .
The comparisons with gold are obvious . Before gold ETFs were allowed ( the first one was in 2003 in Australia ) investors in gold had to physically buy , store and ( if sensible ) insure their gold more often than not in a safe or vault . Trading it was not easy . Once gold was allowed to be held in an ETF format ( not to be confused with gold mining shares ) it provided a “ touch of a button ” route into holding and selling the precious metal . It made a previously illiquid asset , liquid . Look at the chart below to see what happened to the price of Wisdom Tree ’ s Gold Bullion Unhedged ETF between the beginning of 2004 and the Autumn of 2011 – a rise of 377 %. Admittedly , the Global Financial Crisis of 2008 fed the demand for a safe asset such as gold , but would the gold price have risen so sharply if there had not been an easy way for institutions and individuals to trade it ? We ’ ll never know for sure but personally I very much doubt it . Liquidity made a huge difference .
30 |