Securing Assets in a Destabilizing World
Communication marketing for professional investors only
Hackers, experts in cybersecurity – and a former French Prime Minister – came together during the «Safety Symposium», organized by Thematics AM in June 2024 at the George V Hotel in Paris. The panel debated several key questions, three of which are summarised below:
1. Is the world becoming more unsafe?
«We're in a fog, and it's getting thicker,» said Dominique de Villepin, who was French Prime Minister between 2005 and 2007. He explained how war is back on Europe's doorstep and in Gaza, while democracy and free trade are in retreat around the world, and how this was not quite how things were meant to turn out when the academic Francis Fukuyama proclaimed «the end of history» after the fall of the USSR.
Governments must learn to cope with this nebulous environment, rich in surprises, and anticipate the risks they pose to the world. Who could have predicted the war in Ukraine, and the subsequent rapprochement between China and Russia that was considered unthinkable just a few years ago?
According to de Villepin, the world is going through four major ruptures – geopolitics, war, technology, globalization – that are changing the balance of power between nations and zones of influence. With protectionism on the rise, multilateralism in crisis, globalization fragmented, and wars changing strategic alliances, governments are seeking security above all else.
2. Does AI threaten or enhance cybersecurity?
8 trillion US dollars – that's the estimated cost of cybercrime worldwide in 2023, according to Statista. A cyberattack can damage a company’s reputation, result in loss of operations and sales, require rebuilding of the information system, or a long and costly return to service of a plant.
Solutions exist to protect against them but they come at a cost. According to Jean-Marie Letort, Director of Microsoft France's cybersecurity division, cybersecurity accounts for 6 percent to 10 percent of a CIO's budget. For many companies, this substantial budget is a form of insurance premium or avoidance cost in the face of potential losses caused by an attack.
All of which makes cybersecurity an attractive long-term investment theme. As Letort put it, «Cybersecurity is a captive business, offering high visibility on cash flows. Cybersecurity solutions are deployed for 10-15 years.» Technology can help to increase both the danger of cyberattacks and the arsenal of solutions for responding to them.
On the one hand, generative AI can increase the chances of detecting attacks. On the other hand, it can also be used to prepare fishing scenarios, attack patterns, corrupt data injected into a model. In short, AI is not good or bad in itself – it all depends on how it's used.
3. Can we cut security spending?
Safety and security isn't just about cybersecurity and the digital world. It's also in the real world, whether we’re talking about food, water, the work environment, or transportation. And just as ignoring the threats of cyberattacks in the digital world would seem reckless for a modern CEO, cutting security spending in the real world is equally risky for a company boss.
Clearly, even in times of recession, it's often impossible to cut back on safety spending imposed by regulations. Regular maintenance of fire safety systems, for example, is mandatory. However, this regulatory constraint offers the shareholders of companies that provide security solutions visibility and recurrence on the flows generated.
More and stricter regulations mean that we need to invest in safety features, irrespective of the specific engagement. And safety features are increasingly embedded into products and services that we can buy every day – some of which we rarely have the ability to opt out of.
For Thematics AM, safety – like all the trends underlying its strategies – is a secular growth driver, transcending countries, economic cycles and sectors. As Mathieu Rolin, co-manager of the Thematics Safety strategy, concluded: «Companies linked to the safety investment theme offer a level of growth structurally superior to that of the global economy and the MSCI World. Security is everywhere, all the time.»
Written on 27 June 2024
Additional Notes
Marketing Communication. For professional investors only. Past performance is not indicative of future results. All investments involve risk, including the risk of capital loss. The provision of this material and/or reference to specific securities, sectors, or markets within this material does not constitute investment advice, or a recommendation or an offer to buy or to sell any security, or an offer of services. Investors should consider the investment objectives, risks and expenses of any investment carefully before investing. The analyses, opinions, and certain of the investment themes and processes referenced herein represent the views of the portfolio manager(s) as of the date indicated. These, as well as the portfolio holdings and characteristics shown, are subject to change. There can be no assurance that developments will transpire as may be forecasted in this material. In Switzerland: This material is provided by Natixis Investment Managers, Switzerland Sàrl, Rue du Vieux Collège 10, 1204 Geneva, Switzerland or its representative office in Zurich, Schweizergasse 6, 8001 Zürich.
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