Feature – Thematic investing
accelerate,” Hambro says, “driven by societal and demographic changes, increased regulation and government focus, and greater investment conviction. Within the space, the number of related products has exploded.”
New themes
The range of themes is potentially endless, as the world we live in is one that is constantly changing, resulting in a rise of new, and potentially exciting, themes for investors to plug into. “Consumer preferences are forever changing, societal forces are continually wanting to make humankind more efficient or more sustainable, and technology is helping us to adapt to these new habits in a cheaper way,” Hambro adds. Therefore, it is important, and arguably central, to identify those trends which are underestimated, but likely to be the ground-breaking inventions and ideas of the future. “To identify these, we look to the megatrends driving change in the world as we know it for guidance of what is happening all around us,” Hambro says. BlackRock, therefore, identifies five ground-breaking meg- atrends that are beginning to unfold that will shape the future: shifting economic power; climate change and resource scarcity; technological breakthrough; demographics and social change; and rapid urbanisation. Venkatramanan highlights LGIM’s thematic focus. “We focus on technology, demographics and energy and resources,” he says. “We believe that themes emerging from these areas are positively impacting our lives, our work and our society in a structural and foundational way, by leading to behavioural changes and creating efficiency gains that were once unthinka- ble, for example, warehouse and logistics automation and mobility electrification.”
Looking into the future
The implications of these megatrends could indeed be as sig- nificant as the invention of electricity, which sparked the sec- ond industrial revolution in the early twentieth century, or the advent of container shipping that later steered the globalisation era. In both cases, the global economy experienced significant structural shifts, opening new growth opportunities in several industries, and catapulting early adopters to global leadership. It is for this level of change that investors ideally would like from a megatrend. Aanand Venkatramanan says there is an interesting megatrend in greater development of robotics. “One long standing source of innovation, robotics and automation is likely to continue to transform our lives and disrupt an increasing number of industries for years to come. The broad set of available technol- ogies, from software and cloud to robots and machine intelli- gence, can allow warehouses to become “smarter” and let auto-
44 | portfolio institutional | June 2022 | issue 114
mation facilitate tasks and improve safety,” he says. The logistics and last-mile delivery markets also remain key areas of development, Venkatramanan says, as providers opti- mise their networks to manage peak volumes and gain effi- ciencies, spurred by lower margins and higher competition especially in the food and grocery sectors.
Big data
Elsewhere, the digital payment theme continues to be under- pinned by strong growth drivers such as the secular, ongoing shift away from cash transactions and the rise of e-commerce, he says. “In the inter-connected world we live in, in which we are surrounded by Internet of Things devices, artificial intelli- gence and big data, cybersecurity will likely continue to be a major area of investment across all industries,” Venkatra- manan says.
Data here proves the point. According to Cybersecurity Ven- tures, global spending on cybersecurity products and services is expected to grow to $1.75trn (£1.43trn) cumulatively in the five years to 2025, up from $1tn (£800bn) cumulatively between 2017 to 2021. Venkatramanan also says healthcare remains another impor- tant theme, as with the outbreak of the pandemic, not only have we become more conscious of the importance of our health, but also aware of the pressure that hospitals and health-
Consumer preferences are forever changing, societal forces are continually wanting to make humankind more efficient or more sustainable, and technology is helping us to adapt to these new habits in a
cheaper way. Evy Hambro, BlackRock
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