“We want to enable clients to tap into the largest driver of innovation and disruption over the next decade”

Why did you launch the fund?

Sebastian Thomas:
We launched the fund because AI is set to have a huge economic impact and we want to enable clients to tap into the largest driver of innovation and disruption over the next decade1. Consultants PwC predict that AI will drive global GDP gains of USD 15.7 trillion by 2030, making it the biggest commercial opportunity in today’s economy. More companies are exploring how they can use AI to improve their products and consumer experiences, enhance efficiency and drive competitive advantage.

Why is active management key to seizing the opportunities here?

Sebastian Thomas:
While many CEOs are bullish about the potential for AI to transform their competitive prospects, there will be winners and losers. That’s inevitable given the level of disruption likely caused by AI. Some firms will fail in the execution of the underlying technology, others will struggle with cultural challenges related to AI adoption or wider market dynamics. Stock picking and active management will be critical for identifying companies that will prosper.

Can you tell us more about the fund’s history and client base?

Stephen Jue:
We introduced the first Global Artificial Intelligence Fund in Japan with our partners Sumitomo Mitsui in September 2016 and raised USD 873 million in two weeks. It was the biggest new fund launch in 2016, and assets under management now stand at more than USD 4 billion (as of 31.01.2018). In March 2017, we launched a Luxembourg-based UCITS vehicle for Europe and Asia ex-Japan, and recently added leading distribution partners in Singapore, Hong Kong, and China. With primary distribution through retail and private banks, our client base is mostly individual investors who seek secular growth over the long term¹.

What exactly does the fund invest in?

Stephen Jue:
We invest in companies that stand to benefit from the deployment of AI infrastructure, the development of AI applications, and the adoption of AI to transform their industries. At this early stage in the development of AI, about 40 per cent of holdings are related to AI infrastructure, which includes companies in the semiconductor, electronic components, and software sectors helping to build out the AI ecosystem.

What makes this fund different?

Sebastian Thomas:
One of the things that differentiates the fund from, say, a typical tech fund is that it invests in companies across all sectors that are benefiting from the rapid developments in AI – not just the technology sector. For that reason, the fund is not managed to an index. We use the MSCI World Information Technology Index as a reference benchmark. However, as AI is gradually adopted by more companies outside of the technology sector, the MSCI World Index might be more appropriate longer term.

What’s the fund’s geographic exposure?

Stephen Jue:
Although US-headquartered companies constitute the majority of holdings, we expect greater global diversification over time as more AI developments emerge out of research labs, and as AI-related start-ups seek listings. As noted at our recent Investment Forum in Hong Kong, China is investing heavily in AI-related technologies, setting up a potential AI “arms race” with the US.

Can you tell us about some of the companies that the fund holds?

Stephen Jue:
Many companies are now leveraging the latest AI technologies to drive new innovations. For example, Square² is unique in the FinTech space and leverages AI to help onboard and score transaction risks in segments of the market that other processors have been unable to do economically. One of the most exciting longer-term applications of AI will be in health care. Athenahealth2 provides software for managing medical records and patient engagement, and is applying machine learning to optimize the patient scheduling process and help doctors better leverage patient data.

Finally, a question you must get a lot: Do you have any plans to incorporate AI into the investment process?

Sebastian Thomas:
AI can’t replace expert analysts and portfolio managers who are able to meet with management teams, attend industry conferences, analyze technological developments and assess how long-term value may accrue. The other big challenge is that AI-driven investing approaches perform especially poorly during periods of rapid technological innovation and industry-level disruption, when past performance is a poor indicator of future outcomes. That said, we’re always watching for any tools that can improve the repeatability of positive outcomes for clients.

¹ Source: A performance of the strategy is not guaranteed and losses remain possible.
² This is no recommendation or solicitation to buy or sell any particular security.

Investing involves risk. The value of an investment and the income from it may fall as well as rise and investors might not get back the full amount invested. Allianz Global Artificial Intelligence is a sub-fund of Allianz Global Investors Fund SICAV, an open-ended investment company with variable share capital organised under the laws of Luxembourg. The value of the units/shares which belong to the Unit/Share Classes of the Sub-Fund that are not denominated in the base currency may be subject to a strongly increased volatility. The volatility of other Unit/Share Classes may be different. Past performance is not a reliable indicator of future results. If the currency in which the past performance is displayed differs from the currency of the country in which the investor resides, then the investor should be aware that due to the exchange rate fluctuations the performance shown may be higher or lower if converted into the investor’s local currency. This is for information only and not to be construed as a solicitation or an invitation to make an offer, to conclude a contract, or to buy or sell any securities. The products or securities described herein may not be available for sale in all jurisdictions or to certain categories of investors. This is for distribution only as permitted by applicable law and in particular not available to residents and/or nationals of the USA. The investment opportunities described herein do not take into account the specific investment objectives, financial situation, knowledge, experience or specific needs of any particular person and are not guaranteed. The views and opinions expressed herein, which are subject to change without notice, are those of the issuer companies at the time of publication. The data used is derived from various sources, and assumed to be correct and reliable, but it has not been independently verified; its accuracy or completeness is not guaranteed and no liability is assumed for any direct or consequential losses arising from its use, unless caused by gross negligence or wilful misconduct. The conditions of any underlying offer or contract that may have been, or will be, made or concluded, shall prevail. For a free copy of the sales prospectus, incorporation documents, daily fund prices, key investor information, latest annual and semi-annual financial reports, contact the management company Allianz Global Investors GmbH in the fund’s country of domicile, Luxembourg, or the issuer at the address indicated below or www.allianzgi-regulatory.eu. Austrian investors may also contact the Austrian information agent Allianz Investmentbank AG, Hietzinger Kai 101-105, A-1130 Vienna. Please read these documents, which are solely binding, carefully before investing. This is a marketing communication issued by Allianz Global Investors GmbH, www.allianzgi.com, an investment company with limited liability, incorporated in Germany, with its registered office at Bockenheimer Landstrasse 42-44, 60323 Frankfurt/M, registered with the local court Frankfurt/M under HRB 9340, authorised by Bundesanstalt für Finanzdienstleistungsaufsicht (www.bafin.de). Allianz Global Investors GmbH has established branches in the United Kingdom (Allianz Global Investors GmbH, UK branch, 199 Bishopsgate, London, EC2M 3TY, www. allianzglobalinvestors.co.uk; subject to limited regulation by the Financial Conduct Authority, www.fca.org.uk), France (Allianz Global Investors GmbH, France branch, www.allianzgi.fr; subject to limited regulation by Autorité des Marchés Financiers, www.amf-france.org)., Italy (Allianz Global Investors GmbH, Italy branch, via Durini 1, 20122 Milan; subject to regulation by the competent Italian Authorities in accordance with the national legislation), Spain (Allianz Global Investors GmbH, Spain branch; subject to limited regulation by Comisión Nacional del Mercado de Valores, www.cnmv.es), Luxembourg (Allianz Global Investors GmbH Luxembourg Branch; subject to limited regulation by Commission de Surveillance du Secteur Financier, www.cssf.lu) and the Netherlands (Allianz Global Investors GmbH-Netherlands Branch; subject to limited regulation by Autoriteit Financiële Markten www.afm.nl). Details about the extent of the local regulation are available from us on request. This communication has not been prepared in accordance with legal requirements designed to ensure the impartiality of investment (strategy) recommendations and is not subject to any prohibition on dealing before publication of such recommendations. The duplication, publication, or transmission of the contents, irrespective of the form, is not permitted. 18-1162