INVESTING IN TECHNOLOGY & INNOVATION

A Long-term View on Innovation

 

The outbreak of Covid-19 has forced a number of behavioural changes throughout societies across the globe, including how we work, shop and interact with others. These changes are accelerating existing dynamics at a faster pace, including the drive towards digitalisation of business and consumer behavior. At the same time, the world’s medical and scientific community, including health care, pharmaceutical and biotechnology companies are working more closely together than ever, in response to the COVID-19 virus.

Now, more than ever, we see innovation as the main driving force behind value creation in the global economy, as technology becomes more integrated into business processes and consumer behaviour. Growth-oriented investors need to start investing into innovation across industries to have the potential to outperform the market.

Matthew J. Moberg, Portfolio Manager of Franklin Equity Group who manages strategies focused on investing in innovation, believes that COVID-19 will be an accelerant of new innovations in many cases. He shares his outlook for the tech and biotech sectors in light of recent market uncertainty. Learn more in the video.

INVESTING IN TECHNOLOGY & INNOVATION

DRIVERS OF INNOVATION AND TECHNOLOGY GROWTH

 

Technology is fueling disruptive innovation, streamlining outdated processes, and creating new possibilities. We are in the middle of a period of unprecedented innovation where numerous technology-driven themes are starting to disrupt various industries.

While new technologies have already changed our world, the pace of innovation is continuing to accelerate. The coming decades will feature even more growth in digital technologies, tools, and services. Where are the potential investment opportunities?

Artificial Intelligence
Enables data analysis using automated computing processes at scale

Examples: Alibaba, Facebook, Google1

Cloud Computing
Supports companies in scaling their digital businesses globally at a low cost

Example: Amazon1

Financial Services (Fintech)
Key to new commerce growth, allowing for digital transactions

Examples: Tencent1

Internet-of-Things (IoT)
A rich source of consumer and business process data

Example: Qualcomm1

Software as a Service (SaaS)
Provides enterprises with a more efficient way to attract new customers while scaling operations

Examples: Salesforce1

E-commerce
Connects buyers and sellers no matter how far apart
Example: MasterCard, Alibaba1

Medical Technology
New pharmaceutical technologies offer new treatment options for patients and advancements in healthcare

Examples: Illumina Inc.1



As technology becomes more integrated into business processes and consumer behaviour, the pace of innovation will continue to accelerate.

Here are the key reasons why investors need to start investing in innovation.

KEY REASONS TO INVEST

 

  • Widespread Adoption of Technology

    From process automation to big data, digitalisation shapes our world today. More and more businesses are embarking on the digital journey and adopting digital tools to remain competitive.

  • Technology firms are increasingly central to the economy and businesses.

    The sector is dominating the equity markets and will continue to grow as a result of the digital transformation megatrend. Today, seven out of the ten most valuable companies are technology related.

    Top 10 Companies by Market Capitalisation (in USD billion)3
    As of 31 May 2020
  • The valuations of the technology sector (price-to-earnings ratio) remain reasonable and are nowhere near the dotcom era peak. The sector is also the third-most profitable sector in the S&P 500 Index by earnings before interest, tax, depreciation and amortisation margins.5
    S&P 500 Info Tech Index vs. S&P 500 Index
    Price-to-Earnings Ratio    4
    1 July 1996 – 31 May 2020
  • Exciting future themes in Biotechnology

    We see exciting developments to come in gene therapy, immuno-oncology and platform companies, with new ways to deliver functional cures for genetic disorders, new therapies for cancer treatment and disease treatment.

     

  • Opportunities for the next decade and beyond in genomic advancements

    The cost of gene sequencing—the mapping of DNA for diagnostic and curative purposes—has fallen dramatically, creating rich set of opportunities for companies that benefit from this trend.

    Evolution of Genomic Sequencing6

    As the cost of sequencing a gene has declined, the investable universe has expanded from equipment and tools to contract resourcing, organisation, diagnostics, and therapeutics.

    The expansion of investment opportunities is only beginning.

    Evolution of Genomic Investment Universe7

CAPITALISE ON INNOVATION WITH OUR FUNDS

 

The diversity of technology sub-sectors and the prevalence of technology in daily life make a strong argument for treating technology as a core element of investor portfolios.

We see these themes evolving at different paces and becoming investable at different times. Thus, we offer a full range of equity funds that are actively managed to help guide investors into these themes. Check which one best suits your investment needs.

20

years

since launch

Franklin Technology Fund*

  • Identifies high-quality technology companies worldwide

  • Capitalizes on investment opportunities arising from digital transformation

  • Focuses on three leading growth themes cloud computing services, the internet of things and e-commerce

  • 20-year anniversary in April 2020

20

years

since launch

Franklin U.S. Opportunities Fund*

  • Invests in leading growth companies located in the US - the world‘s largest and most resilient equity market

  • A well-diversified, multi-cap, multi-industry portfolio

  • Leading growth fields in focus are technology, biotech and communications

  • Track record since 2000

20

years

since launch

Franklin Biotechnology Discovery Fund*

  • A single-industry-focused fund that invests in biotechnology companies across all market capitalisations

  • Seeks potential growth from recent breakthrough developments

  • Focuses on biotechnology, emerging pharmaceutical, medical technology and life science tool companies

  • Long fund history since 2000

New
Fund

Franklin Innovation Fund*

  • Identifies the growth potential of the most innovative companies worldwide

  • Focuses on global e-commerce, genetic breakthroughs, intelligent machines, new finance, and exponential data

  • A broadly diversified growth portfolio

  • Launched in 2019 – mirrors a similar fund sold in the US with a successful track record since 1968

*Sub-funds of Franklin Templeton Investment Funds, a Luxembourg-registered SICAV ("FTIF").

Our expertise in the technology sector

 

Franklin Templeton’s Strategic Location Technological and digital trends are changing our world at a faster pace than many investors expect. Franklin Templeton’s location in Silicon Valley and San Francisco Bay area gives our team unparalleled access to the world’s largest and well-established technology and biotechnology companies, research universities and venture capitalist firms. This access helps to see investment opportunities and technology-driven disruption before the broader markets.

Headquartered in the middle of the Silicon Valley, the team is located in the proximity of leading technology companies, research universities and Venture Capital firms. This access helps to see investment opportunities and technology-driven disruption before the broader markets.

30

Sector Experts8

Experienced sector experts conduct in-depth research and provide industry coverage across all market caps and styles.



 

NEXT STEPS

To invest or find out more, you may approach one of our Franklin Templeton authorised distributors:

FIND OUT MORE

RELATED INSIGHTS

Article

Investing In Innovation

Change is happening rapidly, active management helps us identify and capitalize on significant inflection points.

Article

COVID-19 Crisis Accelerates the Digital Transformation Trend

COVID-19 and the resulting economic crisis has caused an acceleration in digital transformation.

Article

Biotechnology Innovation During COVID-19

Innovation has always been a key driver for the biotechnology industry, even in the midst of the COVID-19 pandemic.

Footnotes

  1. For illustrative/discussion purposes only. It is not a recommendation to purchase, sell or hold any particular security. It is neither indicative of any portfolio holdings at any one time nor reflective of current or future portfolio holdings.
  2. Source: Intel Corp. A guide to the Internet of Things:  Intel, IDC, United Nations 2016. For illustrative and discussion purposes only.
  3. Source: Bloomberg, as of 31 May 2020. These securities do not represent all of the securities purchased, sold or recommended for clients, and the reader should not assume that investment in the securities listed was or will be profitable. For illustrative/discussion purposes only. It is not a recommendation to purchase, sell or hold any particular security. It is neither indicative of any portfolio holdings at any one time nor reflective of current or future portfolio holdings.
  4. Source for Price-to-Earnings Ratio: Bloomberg, 31 May 2020. Price-to-Earnings Ratio is based on an estimate of Next-Twelve-Months Earnings Per Share (NTM EPS). Copyright © 2020, S&P Dow Jones Indices LLC. All rights reserved. See www.franklintempletondatasources.com for additional data provider information. Past performance is no guarantee of future results. Indices are unmanaged, and one cannot invest directly in an index.
  5. Source: Franklin Templeton Capital Market Insights Group, Bloomberg as of 31 May 2020.
  6. Source: National Human Genome Research Institute. https://www.genome.gov/sites/default/files/media/files/2019-06/Sequencing_Cost_Data_Table_Feb2019.xls. This commentary reflects the analysis and opinions of the investment team of Franklin Genomic Advancements as of February 2020 and may differ from the opinions of other portfolio managers, investment teams or platforms at Franklin Templeton. Because market and economic conditions are subject to rapid change, the analysis and opinions provided may change without notice. Statements of fact are from sources considered reliable, but no representation or warranty is made as to their completeness or accuracy.
  7. For illustrative purposes only. This commentary reflects the analysis and opinions of the investment team of Franklin Genomic Advancements as of February 2020 and may differ from the opinions of other portfolio managers, investment teams or platforms at Franklin Templeton. Because market and economic conditions are subject to rapid change, the analysis and opinions provided may change without notice. Statements of fact are from sources considered reliable, but no representation or warranty is made as to their completeness or accuracy.
  8. Source: Franklin Templeton. Team information as of 31 May 2020.

What Are the Key Risks?

For the key risks of the various funds mentioned above, please click on the fund documents above.


Important Information

Franklin Innovation Fund, Franklin Biotechnology Discovery Fund, Franklin Technology Fund and Franklin U.S. Opportunities Fund are sub-funds of Franklin Templeton Investment Funds ("FTIF"), a Luxembourg registered SICAV.

This advertisement or publication has not been reviewed by the Monetary Authority of Singapore.

This web page is for information only and does not constitute investment advice or a recommendation and was prepared without regard to the specific objectives, financial situation or needs of any particular person who may receive it. Any research and analysis contained in this presentation has been procured by Franklin Templeton Investments for its own purposes and may be acted upon in that connection and, as such, is provided to you incidentally. Any views expressed are the views of the fund manager and do not constitute investment advice. The underlying assumptions and these views are subject to change. Franklin Templeton Investments accepts no liability whatsoever for any direct or indirect consequential loss arising from the use of any information, opinion or estimate herein. The value of investments and the income from them can go down as well as up and you may not get back the full amount that you invested.

Any prediction, projection or forecast on the economy, stock market, bond market or the economic trends of the markets is not necessarily indicative of the future or likely performance.

Past performance or any prediction or forecast is not necessarily indicative of future performance of the Funds. Subscriptions may only be made on the basis of the most recent Prospectus and Product Highlights Sheet which is available at Templeton Asset Management Ltd or our authorised distributors. Potential investor should read the details of the Prospectus and Product Highlights Sheet before deciding to subscribe for or purchase the Funds. This shall not be construed as the making of any offer or invitation to anyone in any jurisdiction in which such offer is not authorised or in which the person making such offer is not qualified to do so or to anyone to whom it is unlawful to make such an offer. In particular, these Funds are not available to U.S. Persons and Canadian residents.

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This advertisement or publication has not been reviewed by the Monetary Authority of Singapore.
Investments entail risks, the value of investments can go down as well as up and investors should be aware they might not get back the full value invested.