Sebastian Thomas is our Fund Manager of the Month. Mr.Thomas is the Lead Portfolio Manager of the Global Artificial Intelligence strategy, a senior research analyst, and a Director with Allianz Global Investors, which he joined in 2003. He heads the firm’s US technology/telecom research effort and has over 24 years of investment industry experience. Mr. Thomas previously worked at Roger Engemann & Associates, a Phoenix Investment Partners company; Fidelity Management and Research; Morgan Stanley; and the Federal Reserve Board of Governors. He also has experience designing, developing, and managing software applications. Mr. Thomas has a B.A. in economics from Pomona College and an M.B.A. in finance and strategy from the University of Chicago. He is a CFA charterholder.
What reasons led you to dedicate yourself to the financial sector? What other profession would you have chosen if it were not to be this one?
From a very young age, I have been interested in the intersection of technological progress, economic development, and financial markets. I first learned rudimentary programming when I was in elementary school and took my first investing class when I was in high school. My interests led me a pursue a degree in economics and my first job at the Federal Reserve Board of Governors conducting public policy research, where I conducted research on financial bubbles and government resource policy, while also helping to design software systems to improve data sharing and access. Ultimately my interests led me to an MBA from Chicago and a career in technology investing.
Taking a brief overview of your work experience, what would you highlight about your career?
With more than 20 years of investment industry experience, I am the Lead Portfolio Manager of the Global Artificial Intelligence strategy, a senior research analyst, and a Director with Allianz Global Investors, which I joined in 2003. I have previously worked at Roger Engemann & Associates, a Phoenix Investment Partners company; Fidelity Management and Research; Morgan Stanley; and the Federal Reserve Board of Governors. I also have experience designing, developing, and managing software applications.
What are your hobbies?
I enjoy playing tennis and chess, which I have the pleasure of sharing with my young son. My family enjoys learning about new places and different cultures, which has become more virtual during the pandemic.
What challenges have you had to face in your daily life during the pandemic?
There are many people really suffering through the pandemic and many are braving the situation to provide care to those in need. In comparison, the challenges that my family has faced with work from home and remote learning have been minor inconveniences. However, we certainly look forward to the day when vaccines are more widely distributed and some sense of normalcy can return, especially to spend time with loved ones whom live far away.
Why is Artificial Intelligence an investment opportunity in the long term? Why consider artificial intelligence?
Artificial intelligence is likely to be the largest driver of innovation and disruption across every industry group for decades to come. The accelerating pace of innovation in AI means that companies will need to identify and deploy new business strategies infused with AI or find themselves at a competitive disadvantage. We believe companies that are able to effectively embrace this innovation are likely to capture a large portion of their industries’ profits like how Amazon disrupted retail and Netflix disrupted media.
The widespread use of Artificial Intelligence-enabled technologies could double the economic growth rates of many advanced countries by 2035. Artificial intelligence is expected to drive global GDP gains of $15.7 trillion by 2030, making it the biggest commercial opportunity in today’s fast-changing economy.
The impact of AI is very broad and will be horizontally adopted in every industry and drive new levels of productivity, time savings, and enhancements. AI could have a bigger and more profound impact on people’s lives and society than even the internet. And for our clients, this inflection point represents an exciting opportunity to access future sources of innovation and growth potential across the market.
Why invest in the Allianz Global AI fund?
The Allianz Global Artificial Intelligence fund is a focused strategy based on bottom-up, fundamental research investing in companies benefitting from the adoption of artificial intelligence infrastructure, applications, and AI-enabled industries.
The goal of the Global Artificial Intelligence Fund is to navigate the changes ushered in by this transformative technology and invest in the companies which are best positioned to deliver outsized shareholder value creation. The fund invests globally in public companies across all sectors that stand to benefit the most from the deployment of AI infrastructure and enabling technologies critical to the growth of AI, the development of AI applications and software to make smarter insights and decisions and the adoption of AI in key business processes to drive AI-enabled industries.
One of the things that differentiate the fund from 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. The fund typically has a high active share of about 85-90% versus other tech funds and indices, meaning only about 10-15% of the holdings would overlap.
The fund you manage, Allianz Global Artificial Intelligence, achieved more than 80% performance in 2020 in a critical year due to Covid-19. What is your secret to success?
The investment team directly responsible for the fund is based in San Francisco. We believe this proximity to so many technology giants headquartered in San Francisco and nearby Silicon Valley as well as the vibrant start-up and venture capital community is a differentiator for our team and helps us remain close to major trends affecting AI.
Additionally, the size and profile of the AllianzGI technology franchise facilitates numerous meetings with tech and non-tech company management teams in our offices and at industry conferences. The team’s analysts conduct over 1,000 meetings with company management teams each year. This face-to-face interaction provides an invaluable source of information on the key differences between competing companies.
Lastly, our team engages in lively debates with other investors in our office on a daily basis and with the broader global investment platform via the Global Collaboration System and other virtual meeting venues regularly.
What are the top three companies in your portfolio? In what type of company would you never invest?
As of the end of December, the top three holdings in the fund were Roku, Tesla, and Amazon. However, the top 3 names represent only about 15% of the portfolio as we believe there a broad and attractive opportunity set opened up by advances in artificial intelligence.
We view every company in terms of the benefit it is driving for all its stakeholders, which includes society more broadly. While we are investors in the equity of a company, we do not believe that sustainable value creation is possible if other stakeholders are harmed. Specific to developments in AI, we believe it is important to invest in companies that guide their AI developments ethically. As such, we believe it is important to engage with the management teams of companies when concerns arise. We would not invest in companies that we believe cause harm to a critical stakeholder.
What is the average number of companies you meet and visit annually?
The team’s analysts conduct roughly over 1,000 meetings with company management teams each year.
What challenges do you have at Allianz Global Investors for 2021?
From an Allianz Global AI fund perspective: We believe we are at the very early stages of massive disruptive change brought about by advancement in Artificial Intelligence and its deployment. We expect these changes to drive meaningful growth for companies that are able to take advantage and drive disruption within their respective industries. While, at times, markets may question the underpinnings of this growth, we anticipate the compounding effect from AI disruption will create long-term shareholder value. Stock picking will be imperative to capturing the benefits of this opportunity, especially in an environment characterised by disruption and change.
Where do you see yourself in 10 years?
I feel fortunate to have a career doing what I love and do not see that changing.