The EG Interview: AXA IM on putting millions into the metaverse

A rural upbringing in the south of France is not an obvious point of origin for a major metaverse investor. “My family are not technological, by any means,” says Pauline Llandric, the manager of AXA IM’s latest thematic tech fund, with a laugh. “They have got a very simple life, in a very rural area.” Llandric, meanwhile, is marshalling millions of dollars of investors’ money into a digital world that, technically, doesn’t even exist. Her focus is the metaverse – the immersive upgrade to the internet, a parallel world of digital worlds, accessed via a virtual reality headset like Meta’s Oculus. “That feeling of immersion is very powerful,” she says. “I was blown away when I when I first tried it. And I thought, this is just offering so many possibilities.” Llandric is part of AXA IM’s technology team, which sits within the fundamental equity team, and is responsible for a series of thematic funds. It invests in the sort of things that make small kids (of all ages) say “Oh, cool!”  “We have been running the technology fund since 2007, the robotics fund since 2015, then digital economy since 2017,” she says, making the investment of hundreds of millions of dollars into emerging sectors sound like a breeze. “Technology and thematics is something we have been doing for many, many years.” In that respect, the new fund – despite the fact it is focused on a sector so cutting edge it sounds like high-concept sci-fi – is more of a continuation of AXA IM’s strategy. “We have got some overlap with our other funds – you want some overlap – but we really thought there were opportunities in the metaverse that were not being captured in our other thematic funds.” Turning profit The metaverse is already a big deal and is growing at rapid pace. Bloomberg research estimates the market was worth around $500bn (£400bn) in 2020, growing to $685bn this year. By 2030, if global investment bank Citi is to be believed, it could be worth up to $13tn with 5bn users. No wonder AXA IM wants a piece of the action. Launched last month, the open-ended, multi-cap fund – Luxembourg SICAV – already has $50m invested in a range of companies within its “metaverse investment universe”, around 250 stocks ranging from gaming giants to workspace disrupters and conductor and chip manufacturers.  But Llandric’s vehicle is not a slush fund for start-ups. “When you tell someone this is a metaverse fund, they probably think this is just invested in start-up companies, unprofitable companies. And it is really not the case.” The fund, in fact, abides by AXA IM’s investment philosophy, which means the focus has to be on quality, cash flow and profit. “Within the portfolio, more than 85% of the names we own are expected to be profitable this year,” she says. “And for the ones that aren’t, we have confidence in that path to profitability. Cash flow generation is really important.”  The range in scale within the potential metaverse investment universe is huge. At one end are the tiny start-ups and privately held wannabe disrupters, the Sandbox land speculators. At the other are vast mega-cap businesses such as Meta, which was able to write off a $3bn loss from its metaverse business, Reality Labs, and still call it a win.   “And then you have the companies in between,” says Llandric. “They have got new ideas, new business models and they are increasingly moving successfully into other areas.”  These are the perfect targets for her fund, among them gaming companies that have now branched out into movie production or launched into digital twin simulating.  The strategy will invest across four key sub-themes: gaming, socialising, working and enabling. Despite the fact gaming dominates the emerging sector, the breakdown of AXA’s investments at the moment is fairly balanced between those four – for now. Gaming is widely recognised as the first building block of the metaverse, while social platforms featuring live experiences are gaining popularity. AXA IM also wants to invest in the “enablers” of this new frontier, encompassing sectors including semiconductors, technological infrastructure, cybersecurity and payment. And then there is the sub-theme of “working”. At the launch of the fund, AXA IM said: “The world of industry is expected to be a large part of the metaverse market, as increasingly sophisticated capabilities enable specialists to design and simulate powerful 3D real-time simulations, or ‘digital twins’. For office workers, the metaverse also brings exciting opportunities for a more collaborative and immersive working environment.” But it is also investing in tech that would provide a welcome alternative to Teams and Zoom, and possibly the office itself. Llandric and I meet online, attempting to force a 3D experience into a 2D Zoom chat. “This could be far more immersive if we were using a headset and were able to have the feeling we were in the same room together,” she says, dialling in from London, where she has spent most of her working life. Not that Llandric is predicting the death of Zoom, or the mobile phone, or real-life interaction. She’s no zealot and admits she doesn’t own her own VR headset yet. Building blocks Some innovations will only be truly possible with this technology, in the immersive worlds of Web3. She turns to real estate applications – simulation software, digital twins, physics engines and virtual viewings. “For things like construction and real estate, this is an area that is not very digitised. But there are opportunities for making things more productive, especially as material costs have increased. “When you just see a 2D picture it’s OK. But it just doesn’t give you that feeling that you are there. With virtual reality in the metaverse you are in the property, you can make measurements.” For Llandric, the impact of the metaverse on real estate will be felt in a number of ways. First there is the virtual real estate world where people buy virtual land. Even she sounds a little perplexed by this phenomenon. But it shows how keen people are to own something that is virtual, and over which, thanks to blockchain, they can claim ownership.  For physical real estate too there are opportunities, she adds, rattling off a list of examples – “your design process, the ongoing maintenance of the building” – before locking on to one that fascinates her. “If you have a digital twin of your building, you can spot faults early. You can monitor everything remotely. You don’t even have to be there physically to solve issues. It’s just collecting so much data about your property, your office building, so you can manage it far more efficiently.” One of the companies AXA IM is investing in within the “working” sub-theme is Matterport, a spatial data platform focused on digital twin technology for real estate. By harnessing Web3 technology, Matterport can deliver high accuracy spatial data insight, transforming buildings into digital twins. It enables customers to improve projects’ efficiencies and also promote real estate in an immersive way. Family first Llandric doesn’t think our first taste of the metaverse will be in our workplaces and businesses. Yes, there will be a few early adopters who are keen to explore the brave new digital world but many more will remain sceptical, or simply unsure how the technology can be integrated. AXA IM has offices all over the world. Llandric frequently has to connect with colleagues in Paris or Hong Kong. But so far she hasn’t felt the need to do so in the metaverse.  Her family is another matter. The distance between her life in London and theirs, 800 miles to the south, seemed to stretch even wider during the pandemic. “Technology is really not their area,” she says. “But if you say, ‘I’ve got you a headset and if you wear this and we can just see each other, like we are in the same room’, they will say, ‘I’m definitely going to buy this device’.” This, she says, is how most of us will enter the metaverse. First gamers, then socialisers, distant families and the workplace. Research firm Gartner has forecast 25% of people will spend at least one hour per day in the metaverse by 2026. “That’s not that far from now,” she says. Younger audiences will adopt it a lot faster, and for greater periods of time. As with social media, the digital-native generations will lead the way and the rest will follow. In this case, though, Llandric thinks others will follow quickly.  “Technology is about making things easier for people. If it does that, adoption won’t be a challenge. It will be easy,” she says.  Her thoughts return to her “not very technical” family again.  “My 94-year-old gran is using now an iPad every day. She is a fan of football, and she’s really adopted the iPad. I never thought she would.”  Llandric can’t wait for her gran to try an Oculus. To send feedback, e-mail piers.wehner@eg.co.uk or tweet @PiersWehner or @EGPropertyNews Image © Danny Mejia; iPad image: Stokpic/Pixabay