The Mobility Innovation investment team believes how we use, power and control all means of mobility is at the early stages of a vast transformational shift that will profoundly impact businesses, governments and consumers through material alterations in interactions across the mobility landscape. The TBCAM Mobility Innovation Equity Strategy offers investors exposure to the development, adoption and integration of the soon to be ubiquitous technologies associated with a new era of smart mobility, which broadly fall within four key areas:
• Autonomous vehicles
Fund Inception Date
31 July 2018
Why invest in this Fund?
1. Targeting attractive returns through a focus on disruption in the transportation landscape: The Strategy seeks to deliver capital growth through investment in businesses exposed to the development, adoption and integration of the soon to be ubiquitous technologies associated with a new era of smart mobility.
2. Dynamic, high-conviction approach designed to generate meaningful alpha across market cycles: The Strategy follows a disciplined and concentrated approach to investing, with the aim delivering excess returns through bottom-up stock selection, regardless of market direction or prevailing economic conditions. Diversification is achieved via a global opportunity set and flexibility to invest across the market capitalisation spectrum.
3. Strong foundations in thematic investing: Thematic research has played a core role within the management of Mellon’s active equity strategies for over 15 years. The firm has been providing dedicated thematic solutions to investors since 2011 and today has AUM in excess of US$7 billion within its range of thematic portfolios.
Here the strategy maintains broad exposure to a range of companies that contribute to and benefit from the drive to mobility. This includes manufacturers of auto components, manufacturers of optical and laser technology and providers of interactive, media and IT services.
Ever more sophisticated vehicles come with ever more sophisticated sensors and data processing needs. As autonomous driving moves off the pages of science fiction and onto our roads the Strategy maintains exposure to this fast-moving segment through allocations to auto components companies, makers of semiconductors and semiconductor equipment and electronics manufacturers.
Mobility is the ability to move or be moved freely and easily. Adaptability, flexibility and versatility has become the name of the mobility game. These days, technological progress has revolutionised the way we get around – from ride share apps and electric vehicles to the systems we use to travel, from inside a car to the road itself. That technology is not just here and now but continues to grow and spread — changing the traditional transportation industry for generations.
Yet despite this connection to innovation and technology, the universe of mobility companies – as defined by one of the first global managers in this space, Mellon – is not just full of cutting edge, high-beta companies. Instead, many traditional auto companies, electronics manufacturers, commodity providers and chemical companies are essential components of mobility innovation.
The mobility managers select stocks from a universe of approximately 175 constituents of the MSCI All Countries World Index. This subset of companies forming the investible universe is constantly reviewed for new disruptive auto stocks, irrespective of whether or not they appeal from an investment point of view. After examining the universe, the management team screens the potential holdings based on the qualitative assessment of their consistency with the theme of mobility innovation.
The framework they use is broken down into what the management see as four key drivers of mobility innovation: Connectivity, Autonomous, Sharing and Electrification.
Technological change has brought driverless vehicles closer to an everyday reality. However, interest in autonomous vehicles stretches back to the 1920s when a radio-controlled car was driven through Manhattan without anyone at the steering wheel1.
There have been many milestones in the decades since in the evolution of autonomous cars, some fantastical, some disastrous – but by 2003 real progress was seen in the guise of automatic parallel parking assistance. Then in 2009 Google began its self-driving project and by 2013 major automotive companies including General Motors, Ford, Mercedes Benz, BMW, and others were working on their own self-driving car technologies2.
Managers on the strategy point out that around 80% of the top 10 original engine manufacturers plan to have highly autonomous technology by 20253.
This is where the rubber meets the road – literally. While the growing trend of driverless cars is one most investors will have heard of – it is worth remembering that such cars cannot necessarily drive on the roads of today. Advancement in driverless vehicles is already leading to data and infrastructure growth, according to BNY Mellon Mobility Innovation strategy team member, George Saffaye.
“Given the scale of technology and physical infrastructure upgrades required to support autonomous driving, the opportunities in areas such as data management, semiconductors, cloud computing, and next-gen 5G low latency-high bandwidth communication systems are significant.”
Some US$32bn has been invested in ridesharing start-ups with new subscription models already under development4. According to Mellon: “With the increasing of urbanisation around the globe, ride sharing will become an efficient and cost effective mode of transportation. Annual congestion cost is US$160bn in the US, including 7 billion hours of lost time and 3 billion gallons of fuel burned. Today, consumers use their vehicles for a wide range of differing purposes; in the future, they will choose an optimal mobility solution for each different specific task.”
Not quite the modern invention we consider them to be, electric vehicles date back more than a century5. For many years, particularly in the latter half of the 20th century, the main hurdle was the challenge of developing a battery able to compete in respect to size, distance, cost, and speed with gasoline cars.
Electric vehicles account for a rising number of overall vehicle sales and this is likely to grow to c.7% – or 6.6 million per year – worldwide in the next two years, according to a report by Navigant Research6.
Within these four main categories of mobility innovation, analysts at Mellon dissect the investible universe. This results in a model portfolio allocation that includes exposure to auto components, automobiles, internet and software companies, electronic equipment and components, semiconductors and semiconductor equipment.
Investment Managers are appointed by BNY Mellon Investment Management EMEA Limited (BNYMIM EMEA), BNY Mellon Fund Management (Luxembourg) S.A. (BNY MFML) or affiliated fund operating companies to undertake portfolio management activities in relation to contracts for products and services entered into by clients with BNYMIM EMEA, BNY MFML or the BNY Mellon funds.
Mellon was formed on 31 January 2018, through the merger of The Boston Company and Standish into Mellon Capital. Effective 2 January 2019, the combined firm was renamed Mellon Investments Corporation.
1 Digital Trends – History of self-driving cars. As at January 2018.
3 McKinsey Center for Future Mobility as at September 2017
4 Delphi as at March 2018, MIT News, innovativemobility.org