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Thematic ideas: Infrastructure

Investment outlooks / Q2 2020


Our investment team has been created to avoid groupthink. We come from a variety of investment backgrounds and countries, speak in excess of seven different languages and span a wide range of age groups. As the importance of digital infrastructure became more prominent in recent weeks and will most probably continue to do so in the weeks and months to come, this prompted us to write about this aspect in further detail.

Each member of the Dolfin Investment Management team has their own perspective, thoughts and opinion and this is reflected in what you will read in the upcoming sections. There are some threads of commonality that resonate throughout this part of the outlook however, we wanted to challenge and provoke discussion with what we write instead of portraying slightly different views of the same topic.

We began our conversation as a team about the thematic focus of infrastructure just as the coronavirus was starting to make its way outside of China. We discussed what qualifies as infrastructure and how wide versus how narrow we should make this thought piece.

What this ended up bringing to the forefront of my mind, is how important and effective digital infrastructure actually is.

We ended up holding our discussions over a combination of Zoom video conference calls, Slack groups and email. What this ended up bringing to the forefront of my mind, is how important and effective digital infrastructure actually is for not just allowing us as an investment team to not communicate properly internally and with our clients, but also to monitor markets, continue to do our research and re-invest our portfolios efficiently despite all of us working from home in multiple countries.

The coronavirus has forced a lot of businesses to adopt and adapt to the changing norms of life within the workplace. The invention of the smartphone and its adoption within the business means that for many, they are never truly ‘out of the office’. This hits home even harder when your home suddenly becomes your office and as a result of a government-imposed lockdown, you are no longer permitted to leave your office!

Digital infrastructure requires an underpinning of physical infrastructure. The ‘cloud’ only operates because of the data centres that sit behind it. 5G has seen a huge amount of investment from companies and countries around the world but this is predominantly focused on the physical masts that are required in order to create the bandwidth required to operate such a service.

Likewise, in order for our entire company to operate remotely, there has been a need for huge investment into not just PCs and peripherals for members of staff, but also in terms of connectivity, virtual private networks, firewalls and VPN bandwidth. The challenge is that as a business we can only do so much. For example, we cannot control the speed of the internet that each individual member of staff receives from their personal internet provider.

Simple tasks like document signing requires alternative methods like Docusign to enable digital signatures. Ongoing interaction with colleagues requires either Zoom or Skype video calls which necessitates a little pre-planning. Team meetings have switched to Microsoft Teams or Zoom calls where many of us are now seeing colleagues in their ‘working from home’ attire and environment.

Our IT team were working round the clock to make sure that as a business we were ready to move into our full ‘working from home’ setup.

As much as this is a combination of physical and digital infrastructure, with little idea how long we are in this situation from a company’s perspective, the infrastructure and network reach further than this. Our IT team were working round the clock to make sure that as a business we were ready to move into our full ‘working from home’ setup. It is one thing executing a business continuity plan versus migration to a 100 per cent of staff working from home set up. This was not about having key people being able to access data, this was about the entire company migrating and being able to continue to function as normal from their home setup combined with a migration from office-based solutions to ones that are cloud based. However, one of the primary issues IT had to deal with was not people’s personal internet connections but the technical knowledge base of employees. Connecting to Virtual Private Networks and Zoom Video meetings are easier for some people to adopt to than others.

We start with James Gutman, who looks at the electricity grid, which is rarely given much attention but upon which everything else depends. The 5G mobile communications network will be essential for letting us work and live collaboratively and remotely. Mikhail Trebunskikh goes into detail on how this technology works and will be rolled out. As our lives become ever more digital, the cloud computing infrastructure discussed by Anton Kapkin becomes ever more critical. And the digital infrastructure we rely upon is not just earth-bound, as Joseph Casanova discusses in his piece on satellites.

We then look at several national infrastructure initiatives. Senior Portfolio Manager, Adrian van den Bok explores the global infrastructure deficit followed by the specific needs of the US, where infrastructure is particularly antiquated in places. In a similar vein, Geoff Wan, has a close look at the UK. Both the US and the UK have also discussed infrastructure spending as part of a stimulus response to Covid-19, making their analysis all the timelier. Maksat Stamakunov then examines the Chinese Belt-and-Road Initiative, which aims to build the infrastructure that connects China to the rest of the world. Finally, Anny Giavelli looks at the global role of infrastructure in achieving Sustainable Development Goals.

I hope that the following sub-sections provide an interesting and thought-provoking insight into the world of infrastructure and once again point to the benefits of thematic investing.

Past performance is not a reliable indicator of future returns. Forecasts are not a reliable indicator of future returns. If the information is not listed in your base currency, then the result may increase or decrease due to currency fluctuations.

If not otherwise indicated, all graphs are sourced from Dolfin research, April 2020.

For more information please read our disclaimer.


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