Fund manager Hyperion predicts Uber, Lyft will fall by 2030

Brisbane fund manager Hyperion Asset Management says ride-sharing companies such as Uber and Lyft will be obsolete within the decade after falling behind in the race to develop autonomous and electric vehicles.

Hyperion’s chief investment officer, Mark Arnold, said it was a two-horse race between Google and Tesla in collecting data to prove the safety of their cars to enable them to be widely available and commercially viable. “It’s going to be a winner takes all market, whoever is first will get most of the market share,” he said.

Mark Arnold, the chief investment officer for Hyperion, says there is a two-horse race for electric cars between Google and Tesla. Glenn Hunt

While Uber and Lyft are also developing fleets of self-driving electric cars, Google and Tesla are way ahead of the pack, he said.

“Tesla has the advantage in that they have over a million cars, eight cameras in each car, collecting data all the time.

“Within five years definitely the actual technical capability [will] be there and then it’s up to the regulators whether they allow it or not,” Mr Arnold said.

“It’s going to be data driven. If you can prove accident rates drop dramatically as a result of autonomy, most regulators will basically tick it off.”

Tesla has the advantage in that they have over a million cars, eight cameras in each car, collecting data all the time. Mark Arnold

Hyperion has been nominated for Morningstar’s fund manager of the year as it homes in on its global growth strategy. Hyperion has ambitions to reach $14 billion in funds under management in its international business, but has a long way to go with $850 million secured at the moment.

“We’ve got a good pipeline of interested mandates and have been marketing in the US for a couple of years now,” Mr Arnold said, adding there was interest from new institutional clients abroad.

“We’re pretty close to winning quite a large mandate there.”

The fund’s Global Growth Companies Fund has produced an average annual compound return of 20.5 per cent since its inception in 2014, compared with the MSCI World Index of 14.5 per cent. Latest performance figures show the fund’s returns over a 12-month period from October 2019 came in 2.7 percentage points above the same benchmark.

Hyperion has “backed both horses” in the autonomous car space by investing in Google and Tesla, a decision Mr Arnold said was based on the firm’s strategy to invest in dominant market players.

Mr Arnold said Australia should “absolutely” follow Britain’s lead to ban new petrol, diesel or hybrid cars within 15 years, but the government was beholden to lobby groups.

“The fossil fuel and car industry is really powerful. They’re very good at lobbying, they’ve got lots of money.”

The global economy is in a period of low economic growth, Mr Arnold said, and rising wealth inequality, climate change and slowing population growth meant low economic growth was becoming the new norm.

Short-term ‘sugar hit’

“If you look at the actual GDP growth for the economy, it’s been decelerating over the last three years. That’s the same in China, Europe and Japan. It’s been slow,” he said.

Mr Arnold criticised governments for engaging in stimulus activity, saying while short-term investment would be a “sugar hit”, it would do more damage in the long term.

“It’s just more debt that will be piled onto the excessive debt,” he said.

“Politicians don’t want to accept that we’re in a low growth world, but that’s really what we’re facing.”

Hyperion has reacted to this macro-economic stage by investing in companies that grow by taking market share rather than relying on economic growth.

The largest holdings in its global growth fund include Microsoft, Amazon, Visa and Facebook, and Mr Arnold said these companies built their growth by taking market share over a long period of time.

This article was originally published in The Age

February 6, 2020

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