The US has long been the global leader in technology innovation, with Silicon Valley and the entrepreneurial spirit that pervades it putting American companies at the forefront of global equity markets for decades.
But China is now challenging that lead, Ben Way, head of Macquarie Asset Management told the Top1000funds.com Fiduciary Investors Symposium at Stanford University.
“The US is the most innovative and entrepreneurial economy. However, across a range of tech and energy sectors – advanced materials, hydrogen, robotics, synthetic biology – you can make the case that China is leading. And I think this is one of the stories that’s quite misunderstood. It’s an interesting debate to be had about who is currently the most advanced.”
Shenzhen – where Way has visited BYD’s Pingshan campus – looks like “the city of the future”, and is a hotbed of technology and innovation, led by robotics and EV technologies.
“The ability of CATL (EV battery manufacturer) or BYD to produce more and more advanced technologies at scale at 7-sigma precision is real. Especially when you consider other competitors are struggling to deliver innovation at 6-sigma.”
But Way said that “massive” opportunities like decarbonisation, deglobalisation, demographic change and digitalisation aren’t limited to these two superpowers – and that he’s more excited as a real assets investor today “than at any other time” in his career.
“For example, today, you can deploy large-scale capital in Japan, including taking control of companies across multiple sectors. That wasn’t a huge opportunity set 5-10 years ago,” Way said.
“You can do the same thing in Korea, which is our biggest market in Asia. We have some 40 portfolio companies there today dating back to the early 2000s. That has been a market where you could have an impact at scale for some decades – we helped build the bridges and the roads that allowed Korea’s economy to really pivot into tech export after the Asian currency crisis.
Macquarie is also exploring emerging markets for deals. While some sectors are fairly richly valued at the moment, the opportunity set is staggering. For example, the vast majority of India’s vehicles still run on old diesel engines, and in a nation of 1.4 billion people, the opportunity to electrify and modernise transport is “significant and needed”.
“Opportunities are coming from everywhere. The rise of deglobalisation, particularly around security – whether it’s supply chain security, critical minerals security or energy security – is creating a new opportunity set in most countries around the world, particularly the top 30 investable markets for institutional capital. This thematic is much more pronounced than it was five years ago.
So, while I wish the world was calmer, while I wish there was less polarisation, while I wish for less volatility (and fairer access to education) … I am excited about the real assets opportunity set, and I am an optimist.”
