Tapping into global megatrends to drive long-term investment strategies
When it comes to investing, short-term and long-term investments are the most evident strategies that arise. Having to choose between them can at times, prove to be complex, as it is all about finding a compromise between how much risk investors are willing to take and how fast they want their investment to grow. To make a long story short, stock prices tend to rise in the long term, while it is harder to make accurate forecasts in the short term. Choosing a long-term investment strategy means capitalising on structural changes that may last for decades. It also proves to be efficient to overcome investors’ behavioural biases. As demographics affect economies, markets, stocks, and ultimately investors, investing on the long run is about figuring out what the world might look like in a decade. Doing so, we can integrate cultural, social, and generational patterns in portfolios. One critical point to understand is that spotting themes will not necessarily lead to successful investments. Indeed, finding the future trends, identifying the winners – and just as important the losers – as well as investing at the right market price are equally important. We are examining these topics in this article.
Defining long-term investment
Assuming that long-term investment is based on secular trends and a multiyear time horizon for value creation, thematic investing seems to be ticking all the boxes.
Indeed, this strategy is about finding companies responding to a particular need, understanding how it is being serviced and investing in companies, which can take advantage of these changing market conditions. Because few themes are constrained to one industry or geographical region, thematic investment covers part of a megatrend. By identifying and understanding relationships across sectors and regions, this strategy can give investors a competitive edge. Yet, facts must prevail over clichés to be successful.
Turning societal change into sustainable investment
Ageing population, technological innovation and urbanisation constitute some megatrends, which will dramatically affect individuals. In the same vein, these societal upheavals are already part of the daily life of any investors. So, how to turn them into tangible investments? East West United Bank has developed a range of investments around these developments while identifying potential winners in global markets.
By way of example, population is ageing. This trend turns out to be a demographic fact. Determining a clear way to invest in that shift is crucial. A spike in the need for healthcare providers is not enough to make it sustainable. However, investing in targeted care services gets the trend appealing by seizing investable stocks that create a long-term tilt towards the ageing population.
The rapid pace of urbanisation across the globe is leaving some cities struggling to cope with. In fact, two-thirds of the world's population will live in a city by 2050. In many instances, those cities will need state-of-the-art infrastructure including innovative solutions to sustain housing, education, and sources of energy, water and food. In this respect, urbanisation turns out to be an important driving force for growth.
Last but not least, middle class in developing countries is emerging. Despite a soft economy, household spending from these countries is growing. Then, the idea is to invest either in Western companies exposed to the consumption of these markets, or in local companies.
All in all, spotting societal shifts help bridge the trust gap. Running long-term investments that relate to investors is for East West United Bank a leitmotiv to reach successful performance.
Get an overview of our Investment Themes:
Explore our Discretionary Portfolio Management dedicated page.