2021 will be remembered as the year in which the last frontier of investment was faced, the year zero of the space economy. That’s what he likes to call Roland Grandi the theme in which the fund invests Echiquier Space, of the Parisian manager The Financière de l’Echiquier.
Few funds have so far dared to use space as an investment theme, alleging that the universe of potential actions is very scarce. In the United States, there is a passive ETF that invests in early defense companies that made developments. But it had to be l’Echiquier who designed the first collection of active management that invests in the 2.0 space in a diversified way by sectors and also with sustainable criteria. Quite a challenge, and a lot of potential ahead.
Thanks to enterprising companies like SpaceX, which make space increasingly accessible, we were able to see the takeoff of a team of four civilians with just a few months of preparation and who even spent several days in orbit, in a much more ambitious mission than those of Blue Origin or Virgin Galactic. For example, Rocket Lab It has already carried out four successful launches this year and since its creation it has put more than a hundred satellites into orbit.
Nevertheless, “It is not a fund of satellites and rockets only”, Grandi warns this journalist and future investors. Is much more.
In an interview with THE SPANISH-Invertiathe manager explains the ins and outs of the product (which has already attracted €50 million) and gives examples of how, beyond setting foot on other planets, life on Earth can also be improved from space.
They have gone against the general thinking among other investment firms that there is not yet a sufficient universe of space-related stocks. Based on your background, then there is?
We have detected 170 listed companies linked to the space economy. We exclude about 40 that have to do with space 1.0 and military and weapons activity. We are left with an initial universe of 130 companies to invest in, which is more than enough to start with.
We highly value those innovative companies that are managed by their founders and that apply environmental, social and corporate governance (ESG) criteria to their activity. Within them, we can find companies from 500 million euros of market capitalization to 15,000 million.
What are the economic and social implications of investing in companies related to space 2.0?
Above all, invest in innovation. We look for topics that will change the planet not in the next few months, but in the next few years. Am millennialam geekyand I can say that the space is an ecosystem of companies that already exists.
The space market is currently worth $400 billion, and is expected to reach a potential $2.7 trillion by 2045.
And what are the particular objectives that you have set yourself as manager, what does the fund pursue?
We could simplify it into two lines of action: exploring what lies beyond the Earth, as well as improving life on Earth from space.
Below these two main lines, there are four sub-trends that articulate the fund’s investments: the activity that takes place somewhere in space, including multiplanetary life; go to space and back; the technology that enables the space economy to exist; and the activities that take place on Earth.
Analyzing the main positions in its portfolio (from Rocket Lab, Palantir Technologies, Nvidia… to Iridium Communications, 3D Systems or Amazon itself), there is a clear bias towards US companies. Will European, Asian or Latin American companies soon be seen in this space race?
There will be, and there already are. But the difficulty is that even today the majority of innovative growth companies are American. Why? Because the US has created a fairly solid investment ecosystem in innovation that allows obtaining a greater number of companies that later grow and are listed on the stock markets than what happens in other countries.
But Europe is represented in the portfolio, with Mynaric (Germany), a leading manufacturer of laser communication equipment for air and space communication networks, or Arqit (UK), which is developing satellite-based quantum communication.
It will take time for us to see more European or Asian companies related to space, because these countries or regions are experiencing the transition from 1.0 to 2.0, still with companies closely linked to the military or defense industry that we want to avoid. The same thing happens in Russia, China, India or Japan, which have very ambitious projects in space terms, but most of these companies are owned by the State and have a defense aspect. But in the end they will arrive in a second stage, and they will give us new investment opportunities. Even in Latin America, where we are increasingly seeing greater interest from space agencies in Latin America to participate in this space race 2.0.
Is there any Spanish company that, if necessary, could become part of the portfolio?
At the moment, we have not identified Spanish companies, but we hope so. More and more companies in Europe are developing programs to help start-ups and entrepreneurs to receive funding and launch into space, and Spain will surely participate because there is this ambition.
The US has created a fairly solid innovation investment ecosystem, but we will see companies from Europe, Asia or even Latin America in a second stage
When people think of space, heavily influenced by cinema, they think of traveling beyond the stratosphere and settling on other planets. But life on Earth cannot be neglected. In this sense, tell me an example of how the spatial theme serves this purpose, which, after all, is what concerns us all in our day to day.
An urgency that concerns us all is climate change. To understand it and act, you have to analyze it. As a result of the UN COP 21, 50 indicators were established to study it, and 26 of them come from satellites. These satellites are the ones that provide information to the States, scientific organizations or NGOs, for example, to intervene when there is illegal deforestation in the Amazon, when there is illegal fishing in the oceans…
Another example has to do with the oil industry. There are pipelines that are leaking oil and that are poisoning the places through which those channels pass and, without satellite technology, it takes three to five days to detect a leak. Thanks to satellite technology, these leaks can be detected in a couple of minutes. With algorithms and artificial intelligence, energy companies can be more efficient and responsible.
Satellite communication also gives power and knowledge to bring the internet to those developing countries where access is not yet widespread, in the case of Bolivia, where I am from. And every time at more affordable prices.
Does the crisis due to the lack of semiconductors affect space companies?
It affects a relatively modest level. As much as we talk about digitization and cloudtoday everything is chips, semiconductors, behind all this there is physics and matter. Today’s semiconductors are giving us the ability to win computational competition. Space uses quite a bit of semiconductor content. These are issues in which we even invest, as there is more demand than supply.
But, having said that, we have not seen much difficulty in our companies in providing themselves with chipsbecause they have been anticipating the demand they are going to have for years, and they have already programmed their purchases and bought large volumes in advance.
What profitability could an investor who enters Echiquier Space expect?
As a reference, we have had the Echiquier Artificial Intelligence fund for three years, which has given an annualized return of more than 30%. We can think that the space theme does the same. On the other hand, when we select a company, we have a minimum requirement of expected profitability in three years, of 15% per year. So each portfolio company should generate at least 15% or more each year for the next three years. If we think that, on average, we have this type of company, the portfolio should give at least 15% annualized. We have the confidence to move within this range of returns.