Fund managers are fond of emphasising their stock-picking credentials over and above their macroeconomic analysis. However, it is clear that they need to pay attention to certain disruptive global trends or risk finding the companies in their portfolio on the wrong side of history.
- Willis Towers Watson and the Principles for Responsible Investment (PRI) have identified five key megatrends for investors
- Technology heads the list, but debt and global capital flow also featured highly
- Advisers need to ensure that their fund managers are on top of these trends
Willis Towers Watson and the Principles for Responsible Investment (PRI) have released their annual ‘Global Megatrends’ survey, which show the major opportunities and threats for investment institutions today.
Unsurprisingly, technological advances and environmental challenges top the list, but social inequality and global capital flow issues, including public sector deficits, also emerge as significant concerns.
Within technology, cybersecurity and privacy topped the list after a year in which large technology groups such as Uber and Experian experienced data hacks. Automation and AI were also on the radar for global investors, alongside digitisation and the Internet of Things. New financial technology also emerged as a serious concern, both as a threat and potential opportunity.
Willis Towers Watson’s global head of asset research, David Hoile, said: “It is increasingly apparent that these megatrends, and the ability to understand and manage them, should form part of all institutions’ investment processes. This report provides an important indication of the key megatrends affecting global investment institutions. A deeper insight into the risks and challenges facing investment institutions is crucial to building resilience and creating opportunities.”
There is a question over the extent to which this should also form part of an adviser’s process. Should they be ensuring that the fund managers they use are paying attention to these criteria as a routine part of their due diligence? Some will already be doing it, but not all.
Fund managers are increasingly keen to chat about their ESG credentials and the extent to which they are monitoring these megatrends, but they approach their analysis in very different ways. An understanding of who is doing this effectively, and who is simply paying lip-service to the trend, is important in assessing the likely winners in future.