OPTO Sessions

“High Octane”: BlackRock’s Kate Moore on the Benefits of Investing Thematically

Kate Moore, Head of Thematic Strategy for BlackRock’s Global Allocation Fund, joins OPTO Sessions to discuss its allocation strategy, her macro-driven approach to investing thematically, and some opportunities to watch, from AI to automation, semiconductors and cybersecurity.

“I call myself a macro equity investor,” says Kate Moore, Head of Thematic Strategy for BlackRock’s [BLK] Global Allocation Team.

Effectively, that implies “taking a lot of macro inputs”, as she told OPTO Sessions this week.

“We have many more tools in our toolkit than a traditional stock-and-bond portfolio”

“By that I mean, not just monetary, but also fiscal policy, for example, or regulation, consumer data, technological change… and implementing them from the bottom up in a very concentrated stock basket of between, say, four and eight names.” Doing so allows Moore to “capture an idea, but in an unconstrained way and access equities geared to that idea. I’m taking idiosyncratic or stock-specific risk when I do that.”

Before Moore came to BlackRock, she was Chief Investment Strategist for the Private Bank at J.P. Morgan and Senior Global Equity Strategist at BofA Merrill Lynch Global Research. She earned her MA in Political Economy from the University of Chicago.

These days, top of her remit is BlackRock’s BGF Global Allocation Fund, which was first launched back in 1997. With over $15bn in assets under management, “it’s one of our largest flagship funds at BlackRock”, she says. “Functionally, it is a kind of go-anywhere, macro fund.” The fund focuses on equity and fixed-income securities worldwide. “Some people may think of it as being benchmarked against a 60/40 portfolio, but we have many more tools in our toolkit than a traditional stock-and-bond portfolio,” she stresses.

An Isolation Investment Approach

Moore’s ultra-focused take on thematic investing differs dramatically from others in the field: “What they effectively do is invest in a very broad swathe of 40 or 50 companies that may tend to have very small, tangential relation to the idea.”

By contrast, Moore’s approach “really seeks to isolate”, meaning her portfolio is “high octane. It’s very growth-oriented. It can put up great numbers but also has a lot more volatility.

“I recognise that, as much research as I do, I may not be able to pick the absolute winner of a thematic idea. What makes sense is to look at the vertical to say, ‘Here are the top two names in each part of this process’, and realise that if I'm right around the idea, the pie is going get bigger, and the top two or three competitors will each benefit.

“I think that’s an important way to think about really capturing the essence of a structural or technological or consumer policy change.”

When allocating, Moore works hard with BlackRock’s team to assess the portfolio’s optimum level of risk. “What are expected relative earnings, what does sentiment and positioning look like? Because that’s so critical to timing the entry into and exit from markets.”

The Expansion of AI

Tech is BGF’s most highly weighted sector, accounting for 16.8% of its assets. Within this, AI is an obvious theme to back as its influence continues to spread.

“We recognise there are multiple ways to invest in AI,” says Moore. “It’s not just, ‘we have to do the hardware’, but also: ‘where’s the plumbing? Where are the software companies?’”

Right now the buzz surrounds AI-enabling chips or software, but this could rapidly shift, says Moore, as older industries embrace tech upgrades and see profound efficiency and productivity gains.

“I think that’s going to be exciting,” says Moore. “We’re going to find the winners and losers in every industry, and particularly in some of the old industries that really need to upgrade their efficiency. It’s going to lead to a great amount of alpha opportunity.” She believes that companies that invest in AI, robotics, automation and smart systems that increase their productivity “are going to be the winners longer term as some of the chips and software become more commoditised.”

Semiconductors are an AI-adjacent sector that BGF is also overweight in. “In the near term, we definitely see them as being winners,” says Moore

“We’re going to find the winners and losers in every industry, and particularly in some of the old industries that really need to upgrade their efficiency”

Amid the AI excitement, Moore believes regulatory challenges are looming. “If there are companies taking too much market share, or that have too much control, I think this is going to be a critical area of regulatory and policy debate.”

As cutting-edge technology expands, the gap between big and small companies could widen, meaning the latter struggle competitively. She cites a CFO Survey by the

Federal Reserve Bank of Richmond, suggesting 75% of large companies are investing in automation technology but only 44% of smaller firms are doing so.

Future Themes

Moore highlights industrial automation as an ongoing opportunity to watch, especially when companies onshore operations and need to stay cost-effective. “We think we're going to see, both as a result of labour and geopolitical tailwinds, more investment in industrial automation going forward.”

Infrastructure for data centres is another area Moore and BlackRock are “very excited” about.

Her eye is also on emerging consumer trends. “Even as consumers are pulled back on some goods and purchases, their willingness to spend a lot on experiences and events has remained really robust. That’s an awesome theme to think about over the medium term.”

New opportunities will likely emerge as companies demonstrate their use cases of AI technology, says Moore. “I wish I had a crystal ball there because I’d buy all the stuff in advance.”

Moore predicts the real winners in the AI revolution will be the companies that own the data. “Because the AI systems themselves are going to become more standardised, these models will be able to apply to lots of different datasets, and the hardware companies will have more competition over time.”

If there’s one theme she anticipates will stick around, it’s cybersecurity, one of the longest-held themes in her portfolio. “Every time I think, ‘Wow, this has been an amazing run’, there is another event that propels them higher. I think cyber threats, and government and corporate investment in that space, are not going anywhere… No one can afford to have an operational error, or a disruption to their business. “That is an area I think would be the least likely to be cut in terms of spending.”

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