Mark Hargraves, Head of Framlington Global Equities, takes a fresh approach to equity investing.
The way that companies do business has changed dramatically over the last 20 years, but many investors’ approach to equities has remained the same. These days, companies are increasingly global and multi-sector in their approach, which means that investors could be missing out on potentially higher equity returns by continuing to base their equity allocation decisions purely on traditional geographic or sector approaches.
We’ve identified five growth themes that we believe will have a radical impact on the way equity investors access long-term growth, which we call the Evolving Economy: automation, the connected consumer, ageing and lifestyle, clean tech, and transitioning societies.
Companies are changing...
Irrevocable demographic shifts and the relentless pace of technological change are forcing companies to change their business models to meet customers’ needs. Take, for example, a technology company that has evolved its product offering to include smartwatches that can measure your heart rate or sleep patterns, and link to devices to monitor blood sugar levels – this defies easy categorisation into traditional technology or healthcare investment classifications.
Similarly, the automotive sector no longer simply manufactures cars, and can instead refer to companies that are developing clean technologies or creating options for personalisation and connectivity with smartphones to keep pace with the demands of connected consumers.
...and equity investment must keep up
To give investors better access to potential opportunities, we have evolved our collaborative research structure by adding a specific coverage of the five Evolving Economy growth themes.
For example, our ‘ageing and lifestyle’ research covers companies catering to the implications of ageing demographics – from those selling products to affluent older populations, to financial companies helping millennials build long-term savings plans, or to real estate companies specialising in retirement homes.
Similarly, our ‘transitioning societies’ research lead looks at companies serving the changing consumption patterns of societies across frontier, emerging and developed markets – from clean technology projects to healthcare firms providing access to medicines.
This multi-faceted approach intends to give investors diversified and quantifiable exposure to growth opportunities. Using our proprietary thematic exposure database, we can quantify companies’ varying levels of exposure to each of our five themes, across a universe of c.11,000 companies, c.100 sub-themes and c.1,400 sub-industries1. Staying true to our fundamental bottom-up stock analysis, we then look for businesses that we believe can benefit from these growth trajectories and generate attractive returns for investors over the long term.
What does this mean for investors?
Companies and the individuals they serve will continue to change. We believe that the Evolving Economy is about identifying the best of these long-term equity opportunities, regardless of how companies are defined geographically or from a sector perspective.
Learn more at: axa-im.com/evolvingeconomy
1 – Source: AXA IM, December 29, 2017
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