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When the Future is Uncertain - have an Edge through Knowledge.

1. Introduction
In Short
Asset Class Equities: particularly in small and midcap companies, Europe/USA/Japan
Investment Goal Achieve marked outperformance in comparison to the relevant market
Investment Idea Identify technological sector leaders on a scientific basis
Implementation Stock selection based on patent portfolio quality and a value approach
Characteristic Use of a scientifically sound patent approach
Portfolio 70-100 stocks, sectors: especially industry, health/pharmaceuticals, technology

The ARIAD Patent Equity Strategy

The backtest shows: in the long term, it pays to focus on innovative hidden champions

Annual investment in the companies with the best/worst patent portfolios

Backtest: jährliche Investition in die Unternehmen mit den besten/schlechtesten Patentportfolios

Innovations dominate our everyday lives as never before in human history. Buzzwords such as "digitisation", "3D printing", "robotics" or "virtual reality" are omnipresent in the media. Patents protect the "invisible" intellectual capital on the company's balance sheet and create additional sources of income thanks to licensing. The problem:

"How do I identify the future technological sector leaders and the really promising innovations?"


Making intellectual property visible and investable

The ARIAD Patent Equity Strategy is a stock selection method that invests in companies with attractive patent portfolios. The patent portfolio quality is calculated with the help of scientifically sound patent indicators.

Current Press Releases about the Strategy (German)

Outperformance Particularly for Small and Midcap Companies

2. Performance

Takeover candidates as a positive side effect


Since its launch in early 2015, the ARIAD Patent Share Strategy has achieved impressive returns in all three regions (Europe, USA and Japan). Since then, the strategy has also been successfully implemented in a mutual fund.

Megatrends

The patent approach is very successful, especially for investments in small and micro cap companies*, whose technologically innovative leadership is often only perceived by the market at a later stage ("Hidden Champions"). Accordingly, there is an above-average number of candidates for inclusion in the fund portfolio, which often only come to the attention of analysts after takeover offers from big players are announced and then suddenly leap up in value.

Investment in small and micro cap companies entails greater risks than investment in largecap companies.

| Updated: 10/31/24 | Patent-Strategy World | Index (World, small & micro caps, EUR NET) |
| YTD |-4.02% |6.55% |
| 1Y | 14.45% | 21.04% |
| 3Y | -9.50% | -2.93% |
| 5Y | 28.94% | 36.84% |
| Since 01/01/15 | 118.73% | 113.17% |


Previous Takeover Candidates in the Portfolio

Sorin Group | Kuka | Nobel Biocare | Cameron | Sharp | Broadcom | CSR | B/E Aerospace | Atmel | Arcam AB | Imagination Technology | Wincor Nixdorf | Baker Hughes | e2v | Alcatel-Lucent | Landauer | Rockwell Collins | Grammer AG | Pacific Biosciences | Parrot SA | Array Biopharma | AK Steel Holding | The Medicines Co | IMA S.p.A. | Immunomedics | MobileIron | Genmark Therapeutics | ADVA Optical Networking | Arena Pharmaceuticals | Tenneco | Plantronics/Poly | Haldex | iRobot | BOBST Group | Aerie Pharmaceuticals | SLM Solutions | Albireo Pharma


Performance of the individual regions

The performance of the Patent Share Strategy varied greatly across the regions. What appears surprising at first glance, is clearly understandable when looked at more closely.

Japan/Pacific Region

Current Sector Focus: Industry


In the Japan/Pacific region in particular, the strategy clearly outperformed. On the one hand, this is due to the innovative strength of many Japanese small and midcap companies and the fact that the majority of foreign investors and analysts mostly pay less attention to the Japanese market than other regions. Due to its long-standing strong technological development, the Japanese market offers interesting investment opportunities, which can be identified by our approach in particular.

Region Europe

Current Sector Focus: Industry


The ARIAD Patent Strategy also performed better than the region as a whole in Europe, too. Right at the beginning of the development of this unique approach, the focus was on Europe with its many companies that are strong in research in various countries.

Region USA

Current Sector Focus: Pharmaceuticals/Biotech


The selection of assets in this region has not been able to achieve the good results of the other regions so far. The main reasons were the much greater penetration of the available strategy universe with larger companies (bigcap), whose potential is lower in comparison to small companies, as well as the current strong focus on pharmaceutical assets. These are prone to fluctuation and are quickly in the focus of investors when their research results are published - in both directions.

The Investment Idea

3. Investment Idea

Information Headstart Thanks to Patent Portfolio Analysis

The strategy approach is very simple to understand:
Most successful companies achieve their profits by using/licensing/selling innovative products and technologies. Patents protect these innovations and thus enable or safeguard the leading market position.

Since the intellectual capital does not appear on the company's balance sheet, the ARIAD Patent Share Strategy can generate an information headstart here thanks to intensive preparation and analysis of patent data, which has also been scientifically tested.

Intellectual Capital is Highly Relevant

The value of most companies nowadays is made up mainly of the invisible intangible assets. Although traditional assets, such as factories, machines or property can be found on every company balance sheet, they are only a fraction of the actual company value.

Share in market capitalisation of S&P 500 companies

The demand for adequate protection of "intellectual property" in the form of patents is rising accordingly. The reasons for a tripling of patent applications over recent decades can found on the one hand in increasingly complex products and the growing importance of licensing revenue, and, on the other, in safeguarding against plagiarism and increasing numbers of patent infringement suits.

Patents continue to gain in importance

Scientifically Proven Connection to Company Success

Many scientific studies have already proved that various information about patents acts as an indicator for the future success of a company. Here is a small selection:

  1. Confirmation of the ARIAD Patent Share Strategy

    on the Basis of the ARIAD Patent Data and Indicators: Houdou Basse Mama (2017)

  2. Increase in the Company Value

    Tobin (1969); Wernerfelt u. Montgomery (1988); Lang und Stolz (1994); Bosworth u. Rogers (2001), Lee u. Grewal (2004)

  3. Revenue Growth

    Powell u. Dent-Micallef (1997); Spanos u. Lioukas (2001); Baum u. Wally (2003); Wiklund u. Shepherd (2003); Desarbo et al. (2005)

  4. Overall Profitability

    Penner-Han u. Shaver (1995); Baum u. Wally (2003); De Carolis (2003); Tanriverdi u. Venkatraman (2005)

The Investment Process in Detail

4. The Process

This is How We Identify Promising Companies

Patent data makes potential innovations visible even before they are launched on the general market. However, not every patent becomes a profitable innovation and the sheer number of patents does not necessarily make a company successful. Using many, scientifically sound patent indicators, ARIAD's patent approach can analyse and assess the quality of the patent portfolio.

Our patent database comprises more than 80 million data sets. However, they first of all have to be processed in a complex process, made usable in quantitative terms, group structures have to be researched and patents correctly assigned to the quoted parent company. Further steps include calculating and weighting patent indicators in order to finally receive the qualitative assessment of the patent portfolio.

On the basis of this information, from a total of more than 5,000 companies with patents, the ARIAD Patent Share Strategy selects around 200 companies whose patent portfolios are the most promising (company ranking). Of these 200 companies, those that have the best opportunity/risk ratio according to the value approach are included in the strategy portfolio.

Videos and Documents

The Strategy as mutual fund:Monega ARIAD Innovation Fund

Opportunities and Risks

Opportunities

  • Technical progress has never been as fast as it is today. Patents, which grant the right to make economic use of an invention, play a key role in this development.
  • Monega ARIAD Innovation invests in companies with an attractive patent portfolio. Shares in companies with a low market value are preferred. Shares in small/midcaps are mainly included.
  • Broad diversification thanks to investment in companies in various sectors. Regional diversification thanks to investment in the USA, Europe and Japan.
  • From a total of 5,000 companies with patents, around 70 - 100 companies with the most promising patent portfolios are filtered out.
  • Fund managed by ARIAD Asset Management.
  • As a mixture for opportunity-oriented investors for long-term investments.

Risks

  • Share risk: In our experience, shares are subject to strong price fluctuations and thus there is a risk of price drops.
  • Interest change risk: The risk of the market interest rate changing during the term of the securities being held is associated with investments in fixed interest securities.
  • Value change risk: As a result of investing the fund assets in individual securities, there is in particular the risk of value changes to the individual items.
  • Capital market risk: The price or market value performance of financial products depends, in particular, on the performance of capital markets that are influenced by the world economy and economic and political conditions in the countries concerned.
  • Currency risk: The fund's assets may be invested in a currency other than the fund currency. If the value of this currency falls against the fund currency, the value of the fund asset falls.
  • Counterparty default risk: Losses may arise for the fund from the default of an issuer or a contracting partner against whom the fund has claims.
  • Liquidity risk: The fund may invest some of its assets in securities that are not traded on a stock exchange or a similar market.
  • Derivative risk: The fund uses derivatives, both for investment and for hedging purposes. The increased opportunities go hand in hand with increases risks of losses.
  • Small and Midcap Companies: Investment in small and midcap companies entails greater risks than investment in largecap companies.
6. Documents

Documents


Presentations


7. Webinar

+++ Webinar on the Strategy +++

Do you want an online presentation including a round of questions to learn more about the ARIAD Patent Equity Strategy?

Then please send an email with the reference "Webinar ARIAD Patent Share Strategy" to info@ariad.de




Also of interest:
The alternative performance source

Disclaimer

©2020 ARIAD Asset Management GmbH

This publication is not a sales prospect in the meaning of the law, but a commercial representation that provides further information. It does not constitute a recommendation for action and does not replace individual investment advice by a bank/sales partner or either fiscal or legal counselling. Shares are sold exclusively on the basis of the current sales prospectus and key investor information. These and the current annual and semi-annual reports are available free of charge in German at Monega Kapitalanlagegesellschaft mbH, Stolkgasse 25-45, 50667 Cologne, and on the Internet at www.monega.de. In the sales prospectus, investment objectives, fees, risks and other important fund information are described in detail. Please read this carefully.

The statements on the market situation constitute our own view of the circumstances described. This does not imply any general validity or investment advice or recommendation. The publication may not be construed as a sale offer or an invitation to submit an offer for the purchase of securities, and does not in any way replace the advice required before each stock purchasing decision. The statements made in the publication are subject to change without notice. Despite careful selection of sources and examination of the contents, ARIAD Asset Management GmbH assumes no liability or guarantee for the correctness and completeness of the information provided in this publication.