GLOBAL DEFENSE AND SECURITY
The Contribution to Peace

INVESTMENT CASE
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GLOBAL DEFENSE

 

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The best way to maintain peace is to have a strong defense... The global geopolitical instability and Donald Trump’s presidency are major positives for defense spending
 

While Trump’s initiatives will spark +10-15% growth on US defense spending, Trump’s election is also having some knock-on effects on US allies, specifically on NATO members
 

Even if the US defense budget and most budgets across the world are well balanced between air, sea and land, most of the big dollars over the next few years will be spent on submarines and ships, next-generation aircrafts and unmanned vehicles
 

As new projects come online, contractors should benefit from significant revenue upside
 

Developments in the civil field from space exploration to biometrics or cyber security are of utter importance given their close links with defense
 

No investments are made in companies manufacturing anti-personnel mines and cluster bombs

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WHAT IS IT ABOUT?
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INNOVATION SHAPES DEFENSE AND SECURITY

 

Many tech innovations come from Defense:

 

  • the GPS positioning system was first created by the US Department of Defense (DoD)
  • iRobot, before developing consumer vacuum robots, had deployed the first ground robot used by US Forces in conflicts
     

Governments are making scientific and engineering research a high priority. The EU plans to create a common research fund for new military technology. Cyber and R&D are top priorities for the US government

 

  • federal budget authority for R&D continued to increase in FY2016 (+7.5%) with a further increase proposed for FY2017 (+3.3%)
  • in 2015 the US DoD opened the Defense Innovation Unit Experimental (DIUx) in the Silicon Valley to support the innovation of disruptive technologies with potential military value

NEW IRON MAN MILITARY EXOSKELETONS:
LIGHTER AND MORE EFFICIENT

 

After Tools and Machines, Automation comes as the 3rd step of technological evolution.

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SCIENCE FICTION IS BECOMING REALITY

 

WHAT IS HAPPENING NOW?
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THE BEST WAY TO PROTECT PEACE
IS TO INCREASE MILITARY SPENDING

 

After years of cuts (2011-2015), global defense budgets were on the rise for the first time in 2016

An Unstable and Volatile Geopolitical Situation (terrorism, austerity, conflicts)

Donald Trump’s FY18 proposed budget points to a massive acceleration in defense spending:  supplemental budget requests (like the $25.2bn one for FY17) will feed the momentum

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THE LENGTH OF DEFENSE CYCLES OFFERS STRONG VISIBILITY FOR INVESTORS

 

It’s worth noting that since WWII, each defense cycle has lasted between 5 and 10 years on average, suggesting that the current upcycle could run until 2020 at least.

 

A TOPLINE OF US DEFENSE BUDGET HISTORY

 

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CATALYSTS ALL AROUND THE WORLD:
THE GLOBAL GEOPOLITICAL INSTABILITY

 

 

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USA

  • Modernization
    budget strengt
  • Trump election

EUROPE

  • NATO: Pressure UK
    by US on EUR
    defense spending
  • European defense
    fund proposal

UK

  • Brexit:
    US influence Europe?
    Defense budget
    Reallocation in EU army?
  • Trident nuclear
    submarines program

 

ASIA

  • Growth of Chinese
    influence in the
    Chinese Sea
  • End of Asian Pivot?

AFRICA & MIDDLE EAST

  • Political instability
  • Terrorist groups
                          

 

Source: AtonRâ Partners;  Heidelberg Institute - Conflicts in 2016

 

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GROWTH ACCELERATING
THANKS TO MASSIVE PROJECTS

 

Modernization budget in US :

  • The main source of revenue for contractors
  • Most recent DoD budget increases have been directed towards modernization
  • Expected to rise faster than the overall defense budget in FY18E-FY21E

Massive defense projects:

  • Aircrafts:
    • Expected orders for Rafale fighter from India and UAE

    • F-35

  • Ships / submarines:
    • Boost from instability in Asia (disputes over islands in the South China Sea) and in North Africa (Mediterranean Sea)

    • US Navy is expected to replace its aging fleet of submarines

    • Defense officials seeking to increase the US Navy fleet by 83 ships (from 272 to 355 ships)

    • Trident nuclear submarines program in the UK

       

 

 

PERSPECTIVES
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A HUGE $1.68BN DEFENSE SPENDING BILL GLOBALLY,
WITH SIGNIFICANT UPSIDE IN NATO

 

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TOP 5 SPENDERS ACCOUNT FOR 61%
OF GLOBAL MILITARY SPENDING IN 2016

 

Source: AtonRâ Partners & www.sipri.org

 

 

GEOGRAPHICAL BREAKDOWN OF
GLOBAL DEFENSE SPENDING IN 2016

 

 

 

DEFENSE EXPENDITURE IN 2016
AS A % OF GDP IN NATO

 

  • NATO Meeting The 2% Of GDP Target Points To $100bn Spending Upside

 

Source: AtonRâ Partners & www.nato.int

PLAYERS
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EXPOSURE TO THE MAIN
DEFENSE SEGMENTS

 

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Land:

  • Combat vehicles
  • Tactical vehicles

Air:

  • Fighters
  • Military plans
  • Helicopters
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Sea:

  • Carriers
  • Submarines
  • Combat boats

Defense:

  • Drones
  • Missiles
  • Satellites
  • Cybersecurity

 

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FOCUSING ON MILITARY AIRCRAFTS,
NAVAL SHIPS
AND DRONES

 

Even if the US defense budget and mosts budgets across the world are well balanced, we believe that the focus will be on: next generation aircrafts, submarines and ships

 

 

ESTIMATED GLOBAL AND US PROCUREMENT
BUDGET FOR UAVS (DRONES)

 

Drones also a top priority given:

  • surveillance needs
  • precision weapon functions

Source: Comptroller.defense.gov; AmericanProgress.org

Source: AtonRa Partners, Sipri, Statista

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SPACE EXPLORATION HAS CLOSE
LINKS WITH DEFENSE

 

During the Cold War, the US and the Soviet Union used space exploration to:

  • demonstrate ballistic missile technology
  • and develop other military applications
     

SATELLITES MAKE THE LINK
BETWEEN SPACE AND EARTH

 

Today, space exploration is a source of innovations in the fields of healthcare, materials, robotics and transportation systems

But also remains important in defense-related fields such as aeronautics and IT & Telecoms (satellites)

Satellites appear as a major actor in the global security value chain, creating the fundamentals for telecommunication technologies

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CYBER SECURITY: A MAJOR ACTION FIELD
FOR BOTH STATES
AND CORPORATIONS

 

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States and international organizations:

 

Corporations:

 

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BIOMETRICS TO IDENTIFY AND TARGET

 

Biometrics uses facial image, fingerprint, iris, DNA or voice pattern to identify individuals  the US Department of Defense is working with multi-modal biometrics (ABIS- Automated Biometric Identification System), a combination of above mentioned technologies

Biometrics has many applications in the civil world as well:

  • accessing corporate buildings
  • accessing devices
  • unlocking car doors
  • opening one’s house door

OTHER INNOVATIONS ARE ALSO IN PLAY

 

Security devices & services:

  • Inspection device makers
  • Security services providers (Securitas, G4S)


Semiconductors, electronics and robotics:

  • Graphics cards providing computing power
  • Robotics
  • 3D printing
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ETHICAL STANDARDS

 

AtonRâ Defense & Security certificate does not invest into companies which manufacture anti-personnel mines and cluster bombs. We also avoid companies manufacturing chemical weapons.