See beyond: thematic investing

31 July 2020

Some structural and transversal, long-term themes are changing society in a meaningful and sometimes irreversible way. Those trends not only impact our daily life but also the way we should think about investing for the long term.

In this report, we highlight four themes that we believe will shape our society and shape investment opportunities over the next decade:

  1. Globalisation reversion;
  2. Demographic shifts;
  3. Smart everything; and
  4. Building a sustainable world.

The themes’ impacts should be considered when thinking about portfolio construction, cross-asset allocations and intra-asset selections.

A reversal of globalisation is occurring and the change in the world order is likely to create uncertainty. And the pandemic can only complicate planning by businesses and policymakers. As such, planning long-term investment and policy decisions may be far more difficult. With high uncertainty and low convictions, the use of volatility as an asset class and the need for a well-diversified portfolio to mitigate the uncertainty factor looks set to be more crucial than ever.

Understanding how changing demographics are likely to affect how people work, live and age can be crucial to prospering from demographic shifts. The last decade has seen the world’s over 65 year olds grow as a proportion of the global population. This seems set to soar further this century, aided by better living standards and healthcare, especially in emerging economies. Similarly, moves to a fairer, more inclusive society are likely to gain more traction.

Smartphones triggered the birth of “smart everything” in a more interconnected world. A world that will soon become far more connected via smart cities and autonomous cars to name but two. Smart devices are likely to create opportunities in many sectors, not just technology. This revolution will take place over years, periodically reshuffling the winners and losers and requiring investors to remain active to navigate an ever-changing environment.

Climate breakdown, structural inequalities and resource scarcity are among urgent social and environmental challenges facing the world. Confronting these interconnected issues will take decades and trillions of dollars of investment. The political will to promote green, “smart” initiatives seems to be growing. Indeed, organisations providing commercial solutions to this issue often do so in rapidly growing markets. And, with many investors, especially millennials, increasingly considering sustainable investments, the future looks green.

Jean-Damien Marie and Andre Portelli
Co-Heads of Investment, Private Bank

Globalisation’s ebb and flow

The global financial crisis marked the period of “peak globalisation” after five decades of closer international ties. The pandemic may accelerate globalisation’s recent reversion. The trend is likely to localise supply chains, alter public spending priorities, increase inflation and hit profit margins. The impact on portfolio allocations may be profound. Finding investments that can profit from this switch appears key.


Opportunities in shifting demographics

Aging populations and other demographic megatrends appear set to reshape the world. Not least in a shift to a more inclusive society. Long-term investors gaining exposure to this trend in their portfolios might enhance returns while making a positive difference.


From smartphones to smart cities

Smartphones have radically changed behaviour while generating vast amounts of data. The rise of smart cities and interconnected devices looks set to produce more data, change production methods and help battle climate change. What opportunities might this create in coming decades and how might investors profit from them?


Building a sustainable world

Urgent, global challenges present investors with some of the largest and fastest growing sectors of the economy. Those that catalyse the right solutions to these long-term trends may find attractive opportunities that can provide the satisfaction of making a positive difference to our world.