Conversations with Albert Tsuei

In this edition of PM Corner, Albert Tsuei, looks at how the pandemic has accelerated the adoption of digital technologies at a faster pace than ever before, and believes investors should embrace the digital future.

27 apr 2021

The strategy has seen fantastic performance since it launched in early April 2020 – what differentiates it from its competitors?

The strategy is co-managed by the UBS Global Wealth Management CIO and UBS Asset Management – we bring the "best of UBS" to our clients, which is a unique value proposition in the market place. The CIO sets the thematic universe and we in Asset Management run the strategy.

It offers investors much more than pure tech exposure – we currently have 47% of the portfolio invested outside of technology. We explore digital transformation opportunities throughout the greater economy. So, we can offer diversification through investments in multiple digitalization related themes across industry, geography and market cap. What’s more, we source alpha across a wide spectrum of companies, ranging from high growth to mature firms – this means that the strategy offers a more balanced barbell approach to thematic investing.

Across various industries (%)

Source: UBS Asset Management, FactSet as at 31 March 2021

Albert Tsuei is Lead Portfolio Manager for the Digital Transformation Equity strategy, a Global Growth Equity strategy, and a Deputy Portfolio Manager and Senior Investment Analyst on the US Large and Mid Cap Growth Equity portfolio team covering the information technology sector.

Prior to joining UBS Asset Management in 2002, Albert worked at IBM Research, Cisco Systems, CS First Boston, Morgan Stanley and Sun Microsystems. At Morgan Stanley, Albert performed fundamental equity research of the server hardware industry. At Cisco and Sun Microsystems, Albert held strategic management roles. He has published a paper in the Journal of Applied Corporate Finance on value creation in the computer industry.

Albert has completed the Series 7 and 63 exams. Albert graduated from Cornell University with an AB in Computer Science and Mathematics. Additionally, he holds an MBA from the Kellogg School of Management at Northwestern University.

What are the biggest investment themes you are favouring and why?

The main themes we are focusing on are E-Commerce, Fintech, Digital Data, Security & Safety, Health Tech and Enabling Technology. We don't have a top down theme allocation – instead, the positioning is purely driven by our bottom-up stock selection. We currently find the most attractive companies in E-Commerce, Enabling Technology and Digital Data. We have increased our exposure to Fintech recently and continue to look for opportunities in Healthtech.

Multiple themes

Source: UBS Asset Management, FactSet as at 31 March 2021

With rising bond yields, tech stocks have come under pressure – what’s the outlook for tech in the coming months?

After massive outperformance since the beginning of the pandemic, the tech sector recently fell by more than 10%, sparked by rising interest rates. However, such corrections, particularly after strong rallies, are not unusual.

The secular growth drivers for companies exposed to digital transformation remain intact. Fiscal stimulus, combined with the re-opening of economies, has led to a spike in interest rates amid inflation concerns and triggered a rotation into more cyclically levered shares. However, the Fed remains constructive on rates citing temporary inflation drivers. Hence, our long term outlook for tech remains positive.

How is this impacting portfolio positioning?

We have increased our exposure to thematically relevant re-opening and cyclical themes. Additionally, we have increased positions in secular leadership companies that have been oversold. Importantly, we differentiate true secular opportunities benefiting from structural change from pure "working-from-home" winners.

Selection process – multiple sources of growth

Investing in various stages of development

Source: UBS Asset Management

What’s the next big digital disruption on the horizon – the hottest trend in your view?

Digital transformation will irrevocably change the way we live, work and play. We continue to explore new possibilities in diversified areas and see significant potential in:

  • Enabling Technologies: 5G, Machine Learning and Cloud Infrastructure. 5G is a foundational enabling technology. It’s a paradigm shift in the ability of devices to communicate robustly at scale that should power the Internet of Things, Autonomous Driving and Edge Computing. We currently have an exposure of approximately 15% to 5G in the strategy.
  • Fintech: The pandemic has forced businesses to cope with a broad array of new payment systems (mobile, touch) as well as new distribution modalities such as online. Adoption has accelerated as businesses now need to manage remote selling channels.
  • Healthtech: The pandemic has provoked the health care industry to further embrace digital transformation. Telemedicine should continue to gain traction and could realize greater potential to treat new chronic care as well as acute care. We see promise in robotic surgery. Such systems make complex procedures safer with minimal invasiveness. And not to forget Genomic Medicine, a space with high growth potential.

Another highly interesting area is the so-called "subscription economy". We believe that the digital subscription addressable market could more than double to USD 1.5 trillion by 2025, with a forecast annual growth rate of around 18%. This would make it one of the fastest-growing industries globally, built around a diversified base of both consumer and enterprise customers.

Invest in "The Next Big Thing"

Source: UBS CIO

What’s your approach to ‘hyped’ companies compared with compelling businesses?

We don’t pay attention to hype. Rather, we conduct original research blending fundamental work form our analyst team with empirical quantitative methods including work from our internal QED Quantitative Team. Our process is simple, repeatable and consistent.

The pandemic has accelerated the adoption of digitalization – is it here to stay?

It's important to say that prior to the pandemic a shift towards the digitization of the economy was already underway. Current events have rapidly accelerated the paradigm, as evidenced by the market shift in spending towards digital businesses. The pandemic serves as a widespread test case for the effectiveness of digitization, many of which will be permanent features and lead to long-term changes for most businesses. COVID-19 is permanently reshaping the way we live and work. Wide-scale digital adoption will outlast the pandemic well after restrictions on activity are lifted.

What’s the outlook for digital transformation?

A short-term correction when markets oversell intact growth stories can provide a good entry point for medium to long-term oriented investors. Periods of consolidation are natural as the market processes halting public health progress, economic recovery, and differential factor risk. While volatility is likely to remain high, equity markets are supported by fiscal stimulus, accommodative monetary policy and strong corporate earnings.

We believe that the digital transformation theme represents the next industrial revolution, and that this set of opportunities transcends shorter-term volatility. An actively managed high conviction but diversified strategy is a key to navigating these markets.

What is your proudest accomplishment as PM?

We are very proud of the team we have put together. Our experienced analytical team offers boots- on- the ground in China and the US, the two geographical centers of digital innovation, in our view. The tremendous performance has been the direct effect of many years of working together closely and two years of incubation. Communications have been robust and frequent, with wide-ranging discussions of risk and interlocking global industry dynamics.


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