Can you imagine what the world will look like in 2020, 2030 and beyond? Our environment is changing at such a rate that sometimes it is difficult to keep up with all the many inventions and developments. Creations will emerge which we may not have even thought of before.
One way to take advantage of such changes is through investing in themes. There are four key drivers of change – termed megatrends – that are seen as major influencers on how the world will be shaped in the years ahead; demographics, environment, technology and social behaviour.
We have only to look at how, in just a few short years, the internet has changed the world, to see how rapidly things could progress in the future. To take another technological example, solar panels used to be expensive and need banks of batteries to work. Now they are slimline, highly efficient, feed back into the National Grid and are reducing in price at such a rapid rate that within a few years they could be within the range of most UK households and potentially charging battery packs to supply the house with electricity at night.
Industries such as this one, energy, and others such as natural resources, food and water, are driving new initiatives, innovations and long-term planning that will require external investment to be brought to fruition. Energy efficiency is one theme that is not only seeing demand from corporates seeking cost efficiencies and competitive advantage, but demand for energy efficient consumer products is being driven by tightening energy standards.
Healthcare and biotechnology are growing industries and are likely to be for decades to come, as the global population becomes older. Here, equipment manufacturers, supplies distributors, facilities providers and others, are all likely beneficiaries of the greater focus on and growth in the healthcare market.
Of course, everyone likes to think they have uncovered the next great investment theme. However, cast your mind back to the late 1990s when people were piling into technology companies. The bubble burst and this shows the danger of chasing investment fads, as well as putting all your eggs in one basket.
Spreading your investments across a number of investment themes is extremely sensible – the principle of diversification – so that should one theme be affected by natural, political or regulatory issues, for example, or simply not take off in the way that was expected, the other themes in the portfolio may help compensate and keep the portfolio on track.
Taking this into account, at Lowes we’ve constructed the Changing World Portfolio that is designed to invest in funds, which themselves invest in the themes that it is envisaged will play an important part in the future development of the global economy and society. The Fund Managers running these portfolios spend their days looking for themes, researching the trends and analysing the companies active within those areas to find the best ones in which to invest.
The Changing World Portfolio is currently Lowes’ best performing portfolio since launch, although past performance, of course, is no guarantee of future results. It has made a total return of 25.66 percent since 1st August 2014, compared to 13.69 percent made by The IA Global Sector over the same period.
Many technologies used in our day-to-day lives wouldn’t have even been imagined just a few decades ago. Inevitably, over the next decade or two, there will be new products, technologies and perhaps even industries springing up that will offer significant potential and it will most likely be companies currently unknown to us that will successfully bring them to market.
If we look back over the past 10 to 20 years and see what has been achieved, there will no doubt be some phenomenal changes in the next 20 years and if it suits our investment strategy, it makes sense for clients to be exposed to those themes as early as possible.
Lowes Financial Management
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