Cybersecurity

Value-added services (tokenisation, fraud analytics, cybersecurity, open banking, issuer processing) now represent ~30% of revenues, growing +25% year-on-year.

Founded in 1984, NetScout Systems, Inc. (NTCT), with a stated mission of “Guardians of A Connected World,” has been a technology innovator providing service assurance and cybersecurity solutions based on its pioneering deep packet inspection technology at scale.

Their database is massively larger than their next biggest competitor’s. Anyone looking to verify this information will almost always choose the largest, most up-to-date database, and employers and payroll providers don’t want to send this sensitive information to more than one company due to cybersecurity risk.

Contributors and Detractors Top contributors to performance for the quarter included US-based memory supplier Micron, US cybersecurity leader CrowdStrike, British semiconductor design company ARM, US data center software provider Snowflake, and Indian online travel company MakeMyTrip.

Cybersecurity and systems software: Rubrik, Inc. , CrowdStrike Holdings, Inc. , and Cloudflare, Inc.

Returns were also helped by continued progress at United Natural Foods (UNFI) as the company recovers from last summer’s cyberattack.

We agreed to re-share our expectations on responsible lobbying, and NatWest committed to providing further information on its governance around cybersecurity and the use of artificial intelligence.

Management’s decision to spend more than $4bn acquiring operational technology cybersecurity businesses at around 20x annual recurring revenue was also concerning, both because of the price paid and because the acquisitions appeared to move Accenture away from its platform-agnostic services model.

In the first instance, this means higher defence spending, but it also means data and cybersecurity.

Visa and Mastercard (the payment facilitators) have systems which are entrenched - we can liken them to toll booths, but additionally they are uniquely positioned to continue to build high-margin value-added services, like cybersecurity.

We would have expected smaller projects, such as testing and strengthening an organisation’s cybersecurity, to be an area of strength right now.

The company suffered a major cyberattack in 2023 that disrupted production and distribution, causing it to lose market share in several categories.

The market has already re-rated cybersecurity and infrastructure software companies and determined that they are a ‘winner’ in an AI world.

On the portfolio construction side, we consolidated our existing software holdings while adding to our highest-conviction names in cybersecurity.

Information security provider CrowdStrike rebounded sharply, data warehouse platform Snowflake delivered strong relative performance and long-time holding Broadcom continued to contribute, underscoring the ongoing importance of cloud, cybersecurity and AI infrastructure exposure within the portfolio.

While some investors had worried that artificial-intelligence tools would displace traditional cybersecurity players, we have been of the opposite opinion for some time.

Where we think there might be an emerging lifeline is in how artificial intelligence is radically changing the threat landscape around cybersecurity.

CrowdStrike is a leading cloud-native cybersecurity company delivering endpoint protection, threat intelligence, and incident response through its Falcon platform.

During the first quarter, we added cybersecurity to this list with our purchase of Palo Alto Networks (PANW).

Palo Alto Networks (PANW) is a leader in cybersecurity and one of the largest pure-play vendors in the space.

Qualys, Inc (“Qualys”) is an established, growing, and highly profitable cybersecurity company and the largest of three leading specialized vendors of vulnerability management software.