Five investment themes for the next decade
“Ten years from now I think we will look back on COVID as our generation’s ‘Pearl Harbor moment’ – a period when extreme adversity spurs innovation and behavioural changes to help address some of the era’s biggest problems.
“When Pearl Harbor happened, the U.S. artillery was 75% horse drawn. Let me say that again: In 1941, three quarters of the U.S. artillery depended on horses. Yet by the end of the war they had entered the atomic age. That incredible transformation sparked a period of innovation and growth in the U.S. economy that lasted for decades.”
2030 may seem a long way away, but investing is all about the future – finding the companies that are going to be successful and sharing in their good fortunes.
The comments of Capital Group’s Martin Romo above got us thinking: what will the world look like in 10 years’ time? We’ve already seen an almost magically rapid development of COVID vaccines at a speed few thought possible. But what else could happen? Will drones have replaced delivery drivers? Will virtual reality be reality? Will cars be autonomous?
The world in 2030: five investment themes
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Decarbonisation
Climate change is a bit theme already today and, pre-pandemic, we knew that $2.4 trillion of annual spend would be required to meet global temperature goals. Governments around the world are now facilitating that move by ‘building back better and greener’. This wider theme includes the need for renewable energy, efficient use of resources, and electrification.
“I think in 2030 we will have widely deployed fleets of autonomous electric vehicles,” commented Chris Buchbinder from Capital Group. “We’re likely to see hybrid electric engines and hydrogen engines introduced into commercial aircrafts too.”
A thematic fund to consider here is Ninety One Global Environment, which is on the Chelsea Core Selection. It invests only in companies helping to decarbonise the world economy, going right through a firm’s products and services, supply chain and areas of activity.
2. Food/Agriculture
Linked to the environment is agriculture and our diets. The food industry accounts for 26%* of the world's greenhouse gasses, with the meat industry being the biggest culprit. It is one of the areas identified as to how Brits will need to change to meet the UK government’s goals by 2030. For example, it is estimated that the British public will need to eat 20%** less meat and dairy over the next ten years. This either means a fifth of the country shoulder the burden and go vegan - or everybody cuts their intake a little.
A thematic fund to consider here is Pictet Nutrition which invests in the equities of companies operating in the nutrition related sectors, especially those improving quality, access to, and sustainability of food production.
3. Healthcare
Robin Parbrook, co-head of Asian equity alternative investments at Schroders, says it is quite possible that by 2030, healthcare in wealthy countries will be tailored, online, predictive and preventative. Healthcare was already an area in need of investment pre-pandemic and the spotlight of 2020 has made it even more so. In developed markets ageing populations mean governments need to be able to treat more people for less money. And, as emerging market middle classes grow, so too will their healthcare requirements.
A thematic fund to consider here is Polar Capital Healthcare Opportunities on the Chelsea Selection. The fund invests internationally across pharmaceuticals, biotechnology, services and medical devices.
4. Artificial Intelligence
Artificial intelligence is being used more and more across industries and will only become more powerful as we create more powerful chips in computing. Combining this power with ever increasing amounts of data will have massive implications for almost every industry in the world.
A thematic fund to consider here is Sanlam Artificial Intelligence. Manager Chris Ford said recently: “In terms of where the AI theme evolves from here, we would expect travel/ticketing, logistics and warehouse management to provide a whole raft of opportunities for AI deployment as economies reopen. And the big structural themes that we have discussed for years – the growth and prevalence of data, increasing levels of automation across almost all sectors and perhaps most crucially the adoption and expansion of AI in healthcare – will continue unabated.”
5. Cryptocurrencies and digital payments
Professional investors are still a little wary of cryptocurrencies, as prices are being driven purely by sentiment at the moment. But they are starting to become more mainstream and the infrastructure around it is interesting. Cash payments may also be a thing of the past in the next decade: the pandemic has moved more people into digital payments – a trend that was already in play.
A thematic fund to consider here is Jupiter Financial Opportunities, another fund on the Chelsea Selection. Current themes in the fund include digitalisation, payment solutions, data analytics, security and the millennial/gen Z wealth transfer.
For more investment ideas, why not read the latest edition of our Viewpoint magazine or take a look at the Chelsea Selection?
*Source: rizeeft.com
**Source: https://www.mirror.co.uk/news/uk-news/new-2035-climate-change-targets-23947425
Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. The views expressed are those of the author and fund managers and do not constitute financial advice.