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Could latest ‘megatrends’ make you mega-rich?

From automated factories to wind farms, huge global changes are being speeded up by Covid. Here’s how they could help transform YOUR fortunes...

IN a ‘bigger is better’ world, it is no longer enough for economists and investment managers to talk about trends. Instead, they talk about ‘ megatrends’ – massive global changes that transcend physical, geopolitical and cultural boundaries. In theory, these huge global shifts, such as an ageing population and the changing climate, should provide rich pickings for investors. After all, if we are all eating less meat, then vegan burger companies should do well, and surely hip replacement businesses should form the bedrock of your portfolio if we are all getting older?

But thematic investing, as fund managers tend to refer to the strategy of picking businesses that might ride this wave of global change, is harder than it looks. We do not have a crystal ball, and seismic events, like a global pandemic, can put predictions out of kilter.

As a result, special thematic funds aimed at catching megatrends, can be a risky buy. ‘It is an exciting area, but investors need to make sure they have their main bases covered first,’ says Laith Khalaf, financial analyst at wealth manager AJ Bell. ‘Thematic funds are specialist and high risk, so should only be used by experienced investors looking to broaden out already well-diversified portfolios.’

If we are investing for the long term, though, it is good to choose our investment funds and stocks with an eye to how the world is changing, whether we invest in specific thematic funds or not.

As we emerge from lockdown into a postpandemic future, Wealth asked investment experts which thematic trends have been affected by Covid-19 – and where the next investment opportunities might lie.

INCREASE YOUR PROFITS AS ROBOTS CUT COSTS

IT IS hard to ignore the huge advances in technology use that have been made since the beginning of the pandemic. Walter Price, who manages investment trust Allianz Technology, says that although the use of technology was increasing across all aspects of business prior to Covid-19, ‘the slope of the curve has increased dramatically since’.

While shares in companies such as Facebook and Amazon have soared in value thanks to our increased reliance on them, experts believe that there is value to be found in other areas of the technology sector.

Jason Hollands, a director of wealth manager Tilney, is excited by robotics and automation – developments that have been accelerated by the pandemic. He says that problems with global supply chains duri ng l ockdowns mean we will manufacture more at home, using robots rather than manpower.

He explains: ‘The pandemic has revealed the risks of relying heavily on global supply chains, whether that is over securing personal protective equipment supplies, spats over vaccines and other bottlenecks.

‘When combined with a desire to reduce travel to cut carbon emissions, you can expect to see a lot more production that had previously been offshored to low cost producers l i ke China, moving closer to home where robotics and advanced machinery can be used to cut the costs of production.’

AJ Bell’s Khalaf agrees. He says automation is a key trend in technology, suggesting that investors who want exposure to this should l ook at exchange traded fund iShares Automation and Robotics.

Among its top holdings is US company Teradyne which makes robots. Bhanu Bhaweja, the chief strategist at investment bank UBS is excited by a shift from ‘bricks and mortar to software, ecommerce, the cloud and intellectual economy’.

James Carthew, analyst at investment t rust research company QuotedData, says that the boom in cloud computing is allowing smaller software companies to attract customers more cheaply.

He suggests that smaller companies trust Herald, run by veteran fund manager Katie Potts, is a good way for investors to benefit from this trend.

CASH IN ON THE RACE TO NET ZERO CARBON

ANOTHER obvious megatrend is the move towards net zero carbon, which is already affecting the investment landscape.

‘ This megatrend was brewing before Covid,’ says Darius McDermott, managing director of investment fund expert Chelsea Financial Services. ‘People had finally woken up to the fact that we can’t keep on abusing our planet – we knew that $2.4 trillion of annual spend would be required to meet global temperature goals. But the solutions have been accelerated by Covid as governments worldwide have committed to rebuilding their economies better and greener.’ McDermott says that one reason to invest sustainably now is that these solutions are being enthusiastically backed globally. ‘We’ve got a rare moment when regulation is backing an investment trend,’ he adds.

Carlos Hardenberg is co- manager of emerging markets investment trust Mobius. He says there is an ‘unprecedented push towards alternative energy sources – from hydrogen fuel

Health | Wealth & Holidays

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2021-06-06T07:00:00.0000000Z

2021-06-06T07:00:00.0000000Z

https://mailonline.pressreader.com/article/282849373913885

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