February 2023

Insights

Long may the rally continue

 

2022 was nothing short of a nightmare for high-growth thematic equities. Popular themes such as Cyber Security and Data Processing ended the year deep in the red following the unprecedented speed and magnitude of interest rate hikes that occurred. However, we believe that their investment theses remain firmly intact. 

The worldwide cost of cyber-crime is projected to grow to a staggering $23.8 trillion by 2027. To give context to this figure, US GDP is expected to be approximately $30 trillion by then. The rise in digitalisation has exposed corporations to exponential levels of cyber-crime, with the average cost of a data breach in 2022 being $4.35m. When you look at the facts, it becomes quite clear that cyber security is becoming a non-negotiable cost of doing business.

Semiconductors are indispensable in the modern world. Aside from the fact that it is projected to be a $1 trillion market by 2030, merely thinking about the hundreds of chips we come into contact with through the course of our daily lives illustrates that they are truly the engines that power digital life. Although disruptive trends such as artificial intelligence and vehicle electrification are still in their nascent stages, these are only expected to increase the demand for chips exponentially in the years to come.

After an incredibly difficult 2022, the rebound of high-growth thematic equities in the new year has been one for the books. Despite the Fed delivering a 25bps rate increase and signalling that no rate cuts are likely in 2023, investors responded by taking the MSCI World Growth Index to its highest levels since August last year. Whispers of a new bull market have begun spreading amongst equity investors, buoyed by an optimism for a so-called “soft-landing” scenario.

Year-to-date, the performance of our Wealth Warriors Fund has been strong, driven by impressive rallies in our high conviction themes that we have meaningfully increased our exposure to. Data Processing and Cyber Security have returned 34.4% and 23.4% respectively and we remain incredibly positive on the prospects of these themes over the long-term.

 

High Street, Bloomberg, 16/02/2023

 

Sources: McKinsey, FBI, IMF, Surfshark, Ponemon Institute, Statista

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