Doug Goodwille from Kayne Anderson speaks to Drew Meredith from The Inside Network on market thinkers.
While a surging gold price is on hold as the world adjusts to a Trump presidency, all the factors that saw its price rise more than 50 per during his first term in office – trade disputes, fiscal deficits and geopolitical tensions – are almost certainly guaranteed the second time around.
The most powerful megatrend of our time
Investors seeking to generate above-average returns need to identify and capitalise on some of the trends occurring today that have the potential to become the megatrends of tomorrow. ETF Securities recently released a white paper outlining the megatrends that investors should watch in a post-COVID world.
Prior to the pandemic, investors were capitalising on companies that were growing on the back of a megatrend. With the onset of Covid-19, new trends emerged, some were accelerated, while old ones faltered. ETF Securities will go through some of the major demographic and technological trends transforming economies and how it is taking advantage of these changes.
ETF Securities head of distribution, Kanish Chugh, says: “More and more investors are using long-term structural shifts that transform economies – or megatrends – as the basis for their investment decisions. Correctly identifying and acting on megatrends can offer enormous upside. Those who invested in computer businesses Microsoft, Apple and IBM in the 1970s, on the cusp of the personal computer revolution, went on to reap super-profits.”
ETFS issues thematic ETFs which also follow an index, albeit a highly customised one. The main difference between a thematic ETF and a normal ETF is that the indexes the former kind track are designed to target megatrends. The indexes are usually more detailed, specific and research-intensive than the household-name indexes like the S&P/ASX 200 or Nasdaq 100. They can, in some instances, be built by research houses or consultancies with specialist knowledge of a megatrend.
ETF Securities groups megatrends into four categories, which it believes are only just getting stated:
- Transformative technology. ETFs says robotics, automation and artificial intelligence make up the next frontier, which it dubs “industry 4.0”. In this industry, ETFs says “businesses use modern robotics, the internet and big data to create remotely controlled factories, self-driving cars and self-programming computers. Amazon’s warehouses, where items are moved by robots, are a good example.” ETFS ROBO Global Robotics and Automation ETF (ASX Code: ROBO) offers investors exposure to the robotics, automation and artificial intelligence (RAAI) revolution.
- Society and lifestyle. This is where the FANGS come into play. Facebook, Apple and the rest have changed the way people interact with each other. ETFs says opportunities exist in emerging markets, particularly China and India. ETFS’ FANG+ ETF (ASX Code: FANG) offers investors exposure to this sector.
- Healthcare and wellness. Advances in technology have boosted the application of genetics, with a focus on the mRNA field. ETFS’ S&P Biotech ETF (ASX Code: CURE) offers investors exposure to U.S. healthcare biotechnology companies.
- Environment and resources. Following on from US President Biden’s climate change infrastructure plan, the world started transitioning to carbon-free. It’s a big tick for companies that supply raw materials or manufacture products for this sector i.e. battery technology and lithium. ETFS’ Battery Tech & Lithium ETF (ASX Code: ACDC) offers investors exposure to the energy storage and production megatrend.
By definition megatrends are usually long term. That means they can take years if not decades to eventuate. But with patience, these megatrends can be well worth the upside.
