Partner Insight: From climate change, to AI, investors are increasingly turning to different themes in order to generate an income. But which megatrends are a viable long-term investment opportunity?
Megatrends are defined as global, macro forces that will transform business, the marketplaces that they operate in, and society at large. The term was first coined more than 35 years ago by US author, John Naisbitt in his first book ‘Megatrends: Ten New Directions Transforming Our Lives', and since then this area has developed to include a wide range of subjects: from robotics, technology and demographics.
Indeed, demographics is one of the most significant megatrends impacting economies around the globe today. By 2020, the spending power of people aged 60 and over will reach an estimated $15trn; representing the start of a globally applicable wealth shift set to transform world economics.
At the other end of the spectrum, the millennial generation is growing and could soon be one of the largest in history. We have seen in recent years how this influential group has re-defined investing in areas as diverse as finance and sustainability.
Demographics is not the only megatrend forcing substantial change amongst investable companies today. Technology, infrastructure, socio-economic movements: the pace and complexity of changes in these areas is overwhelming.
For investors positioned correctly along the continuum of these themes there is the ability to witness and participate in significantly attractive returns. Yet valuing megatrends, or perhaps analysing the longer-term value of companies exposed to megatrends can be difficult. Before investing, investors should analyse the true value of a particular company and remain wary of over-valuations that can be apparent in the short term.
Indeed, investors should remember that patience is key when it comes to megatrends. It is interesting to note that some of the megatrends we refer to today have actually been around for decades - particularly secular trends like globalisation and urbanisation which have been around for centuries. Find out the challenges of accessing these megatrends, and how they have evolved in the exclusive AXA IM podcast: Megatrends: Investing in the future.
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