What is the Evolving Economy?
Companies have dramatically changed the way they do business in recent decades, but many investors’ approach to equity investment has remained the same. We’ve identified five multi-decade themes that we believe will shape the way companies operate in future, which will also have a radical impact on the way equity investors should invest: automation, the connected consumer, aging and lifestyle, clean tech, and transitioning societies.
Why should investors care about the Evolving Economy?
These Evolving Economy themes are the results of long-term demographic trends and technological developments. We believe they offer equity investors access to the best opportunities for long-term structural growth, regardless of how companies are defined geographically or from a sector perspective. We expect each of these multi-decade themes to show double-digit annual growth– for example the global robotics market is expected to grow 10% per year until 2025 (according to BCG, BAML).
How can investors access the Evolving Economy?
To give investors quantifiable exposure to the Evolving Economy, we have adapted our internal research capabilities at Framlington Equities to incorporate the five main thematics that we believe represent the future for long term fundamental growth investing:
Ageing and Lifestyle
Focuses on the consequences and opportunities of extended life expectancy. Ageing Populations are becoming a global phenomenon, with the number of older persons expected to double to more than two billion by 2050* . While there are several ways to play the “longevity economy”, we are particularly focused on Prevention & Wellness, Treatment and Aged Care.
Covering the e-commerce value chain and digital transformation. Ongoing internet penetration and the increasing ubiquity of mobile phones continues to drive the uptake of e-commerce, helped by ever improving technology. The pace of technological innovation is accelerating and its impact is being felt across all facets of society. There are very few areas of life that technology has not yet touched and its influence is expected to continue to grow.
Encompassing applications of robotics and automation across a variety of industries. Robotics are rapidly changing every aspect of how we work and live. With the robotics industry is expected to grow by 10-15% per year until 2025** we believe we are only in the early stages of a long-term trend.
Covering low-carbon economy solutions and sustainable resources management. The political and social drive to find cleaner and more sustainable energy solutions is, we believe, supported by the confluence of huge demographic, environmental and economic changes. We think there are multiple areas of opportunity, from the low carbon economy to sustainable water management and resource optimisation solutions.
Focusing on the economic inclusion and changing consumption patterns both in developed and, in particular, emerging markets. The ongoing growth of the middle class is “a historical shift not seen for 150 years”***. Almost 90% of the next billion entrants into the global middle class will be in Asia****. Supported by this demographic shift, we expect to see a consumption boom in the developing world.
** Boston Consulting group, 2014. There is no guarantee that forecasts will be met. For illustration purposes only
*** UN 2013
**** Brookings institute 2017
This page is for informational purposes only and does not constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services and should not be considered as a solicitation or as investment, legal or tax advice. The strategies discussed herein may not be available in all jurisdictions and/or to certain types of investors. Opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. No guarantee, warranty, or representation is given as to the accuracy or completeness of this material. Reliance upon information in this material is at the sole discretion of the reader. This material does not contain sufficient information to support an investment decision.