The Evolving Economy

The Evolving Economy is all about identifying companies that are tapping into multi-decade demographic and technological changes, regardless of their region or sector classifications.

Welcome to equity investing’s new reality.

What is the Evolving Economy?

Companies are growing ever more global and multi-sector in their approach, but many investors’ approach to equities remains the same. We’ve identified five themes that we believe will shape the way companies operate in future, which will also have a radical impact on equity investors: automation, the connected consumer, ageing and lifestyle, cleantech, and transitioning societies. We call these themes the Evolving Economy.

What is thematic investing?

Thematic investing – often called trend investing or mega-trend investing – is a broad term used to describe investment approaches which focus on certain economic, corporate, social or technological themes. In today’s highly disruptive world, these themes are typically focussed around the main two drivers of long-term corporate behaviour – demographic shifts and technological changes.

The five Evolving Economy themes we have identified are the results of long-term demographic trends and technological developments. We believe they can offer equity investors access to the best opportunities for long-term structural growth, regardless of how companies are defined geographically or from a sector perspective.

AXA IM's megatrend investing themes

 

Does thematic investing work?

We believe that geographic or investment sector definitions – which were once a convenient way for investors to classify companies and decide asset allocations – must evolve to meet the reality that the world is increasingly complicated and connected than ever before.

A thematic investment approach can therefore help investors:

  • Tap into drivers of long-term change and growth
  • Better identify companies’ longer-term prospects
  • Articulate particular investment convictions

Is thematic investing a long-term approach?

We believe that thematic investing should fundamentally seek long-term outcomes for investors and is therefore a rational rather than fashionable approach. In fact, we see thematic as the new normal of equity investing.

While many individual themes or trends can capture investors’ attention, it’s important to take a nuanced and diversified approach. This can help investors mitigate volatility and cyclicality which may arise from a theme having a small or concentrated investible universe of suitable companies. Picking the right – and most sustainable – themes is of course crucial too, and you can read more about how we choose our themes here.

How can investors access the Evolving Economy?

To help people invest in the companies that are embracing these changes, we have adapted our internal research capabilities at Framlington Equities to incorporate the five main trends that we believe represent the future for long term fundamental growth investing. 

In addition to these themes, investors can gain exposure to all five themes of the Evolving Economy through a single point of access to this expanding universe of growth opportunities. Find out more below:

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*Ageing & Lifestyle - US Department  of Commerce, latest data available as of March 2018
*Connected Consumer - Citi Research, Citi GPS “Technology at work v3.0”, August 2017
*Automation - IFR World Robotics Report 2017, latest available data as of March 2018.
*CleanTech - Financier Worldwide, “Investing in the clean technology revolution”, January 2016
*Transitioning Societies - UN, correct as at March 2018

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