Chloe Shea, Schroders
Investors taking a thematic approach to the ongoing structural changes in the world around them should not limit themselves to the environment and sustainability.
In particular, innovative transformation along with cities and lifestyles present significant potential as technological advancement enables many different investment themes to thrive.
“These core themes can be related to trends such as smart cities, healthcare innovation and smart manufacturing,” said Chloe Shea, investment director, multi-asset at Schroders. “We are already seeing a number of structural drivers that are likely to have a material impact on the economy as well as the investment markets over the next decade and beyond.”
Such developments not only reshape how companies operate, but also expedite the manufacturing automation process, she added. “Investors will inevitably need to take an innovative investment approach in an ever-changing investment era.”
Smart manufacturing strategy
In the manufacturing space, tech and the availability of actionable data enable production efficiencies, in turn cutting waste and downtime, reducing energy consumption and driving innovation across the entire manufacturing value chain.
“Together, these advances are boosting productivity and, ultimately, profitability,” explained Shea.
Using the example of automation, robots are moving beyond playing basic roles to become collaborative robots, or ‘cobots’, which are more agile, have a wider range of capabilities and can work alongside humans. This opens up the robotics potential into new end-markets like electronics and food and beverage production.
Schroders believes continued supply chain and margin pressures will further drive demand for smart manufacturing companies. “We think the potential for automation remains huge,” said Shea.
Living new lifestyles
Further, the way many consumers live is changing rapidly as global connectivity enables new products and services to be created and delivered almost immediately and simultaneously. This leads to a wider adoption of innovations and a quicker redefinition of norms.
Covid-19 has also accelerated changes in working practices and lifestyles, with work-from-home arrangements making digitalisation, automation and cloud computing a necessity.
“Coupled with shifting consumer behaviour, technology and e-commerce related investments saw accelerated growth,” Shea explained.
A smarter approach to investing
Amid all these themes, growing upward pressure on yield and higher interest rates creating the potential to derail earnings for companies make an active approach essential – requiring investors to adjust relative exposure to different major themes.
“Taking a multi-thematic approach means that investors will have the flexibility to diversify and dynamically rotate into themes with different styles under different market environments,” said Shea.
At the same time, investors should look beyond specific industries or regions when selecting companies relevant to the trending themes.
