Monday
Every day in the office starts with our morning investment meeting, with colleagues in Asia joining the European team to discuss what has happened over the previous 24 hours and what it means for markets and our portfolios.
There is plenty to keep us occupied at the moment. Geopolitics is inevitably high on the agenda, particularly what ongoing conflicts could mean for energy markets, inflation and interest rates. But we are also interested in the second-order effects. Energy security and resilience have become much greater priorities for companies and governments, reinforcing the need for technologies that can improve efficiency and reduce resource dependence.
Data centres are another recurring topic. The AI infrastructure build-out has brought data centres’ energy and water requirements increasingly into the political debate in the US. For us, the challenge is working out how much represents a genuine risk to the data-centre pipeline and how much is headline noise.
Monday evening provides a change of pace with my weekly drama class. Markets require plenty of performance of their own, but thankfully of a rather different kind.
Tuesday
Company meetings are a big part of the week, and today we meet the management team at Monolithic Power Systems, an analogue semiconductor company specialising in some of the more technically demanding areas of power management.
Efficiency and power density increasingly matter as computing requirements become more sophisticated. Our conversation is less about predicting the next quarter and more about where the next leg of growth could come from. Data centres remain a significant opportunity as their power requirements increase, but we also discuss industrial automation and robotics – areas where increasingly sophisticated applications require equally sophisticated power-management technology.
It is these longer-term conversations that tend to be most valuable. Forecasts will inevitably change; understanding whether a company’s competitive advantages can endure is much more important.
Wednesday
Today includes a call with a sell-side software analyst to discuss one of the more interesting debates in equity markets this year, whether AI will disrupt established software businesses or make their products more valuable.
We tend to favour vertical software companies serving specific industries, where products are deeply embedded within customers’ workflows. These are often mission-critical applications where replacing an incumbent is considerably more complicated than simply adopting the newest technology.
Our working hypothesis is that AI can be additive for many of these businesses, enhancing their products, making them more valuable to customers and potentially creating additional monetisation opportunities.
The point of speaking to an external analyst, though, isn’t to have our existing view repeated back to us. We want to understand the pushback he is hearing from other investors and challenge our assumption that AI strengthens rather than weakens these competitive positions. Testing your own conviction is as important as building it in the first place.
Thursday
Our portfolio review meeting gives us an opportunity to step away from individual companies and consider how everything fits together.
We look at sector and factor exposures, what has been driving performance relative to benchmarks and peers, and where risks may be accumulating. Our analysts also contribute to the discussion, bringing their perspective on individual holdings and any developments in the investment case, valuation or performance. It helps us combine our bottom-up research with a broader view of how the portfolio is positioned.
Earlier in the year, several of our AI-related holdings had performed very strongly and, while we continued to believe in their long-term prospects, valuations were starting to look stretched. Sticking to our valuation discipline, we therefore decided to take some profits.
When volatility subsequently returned to parts of the AI ecosystem, that decision helped protect some of the gains. It was a useful reminder that enthusiasm for a long-term theme shouldn’t mean abandoning valuation discipline.
Friday
Another company meeting today, this time with Sabesp, the water and wastewater utility serving São Paulo. Brazil is prone to drought and water scarcity, making the efficient management of the resource particularly important.
Sabesp has been undergoing significant change following its move from state ownership to predominantly private ownership. Part of the opportunity is improving efficiency while accelerating investment in water and wastewater infrastructure, including smart meters and sensors.
I finish the working week speaking with clients, where AI remains a prominent topic of conversation. One question that comes up regularly is how data centres, given the amount of energy and water they consume, fit within an environmental markets investment universe.
Our focus is on the solution providers. If growing computing demand creates a resource-efficiency challenge, we want to identify the companies providing the technologies that enable data centres to use energy and water more efficiently.
Weekend
Weekends increasingly revolve around our one-year-old son, who has recently started nursery. Much of life now involves coordinating pick-ups, drop-offs and the various logistics that accompany having a young child.
I also make time each week for Greek traditional dancing. I am Greek, so it gives me a connection to home while being completely removed from the day job.
Between that and the drama classes, there are fortunately a few hours each week when I’m thinking about something other than markets. By Sunday evening, though, attention inevitably starts drifting towards what Asia might have in store for us on Monday morning.
