The mega trends that will define our post-Covid future and beyond
Investing in Tomorrow’s World
The prospects of a circular economy in China
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Making the most of thematic funds
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Fund Selector
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Thematic as an inflation hedge
Making the most of thematic funds Global warming is real. What does that mean for thematics? The tech disruption that keeps on giving
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FUND SELECTOR
HSBC Private Banking is betting on four high conviction themes focused on secular growth opportunities linked to policy priorities, long-term trends and the global search for yield. Its chief investment office is recommending investments in areas like digital transformation, sustainable investing, Asia’s new growth path and extending the recovery in a low yield world. Within these, smart mobility, automation, security, healthcare innovation, China’s green revolution, climate change, infrastructure, and sustainability make up the bank’s diversified basket of investment themes. ‘Specific to Asia, I would say Asia is just catching up on the sustainability themes,’ said Lina Lim, the regional head of discretionary and funds for Asia Pacific, in an interview with Citywire Asia. ‘We have seen client interests in healthcare innovation, next-generation and renewable energy themes.’ HSBC prefers to invest in multi-year structural themes that are expected to pan out over time particularly over the mid- to long-term investment horizons. Like most wealth managers, the bank has also seen an acceleration in the adoption of digital technology in service consumers amid the extended period of lockdowns, social distancing, and remote working. What’s more, a lot more products and services are now being offered and transacted through digital tools and platforms. ‘Now more than ever before, companies are opening up new markets and creating new revenue streams globally through digitally-enabled platforms and tools,’ Lim said. ‘This is revolutionary and will have significant financial implications to companies around the world.’ In the digital transformation space, HSBC believes the cybersecurity industry will likely benefit from the use of more digitally secure systems across video software, mobile apps, e-commerce, and videogames. Furthermore, 5G will increase the pace of technological improvements, making automation an even more compelling alternative to manual processes, as well as enable smart city innovation. In China, the bank continues to invest in the country’s secular growth opportunities focused on semiconductors, advanced technology, automation, and the net-zero transition. The fund selector said while the pandemic has had a profound impact on investors’ behaviours, it was also a wake-up call to the world on the vulnerability of the healthcare system. As such, HSBC launched a new theme, the ‘rise of S in ESG’, focusing on social UN Sustainable Development Goals like #3 Good Health and Well-being, #5 Gender Equality and #10 Reduced Inequalities. It expects new treatments, devices, diagnostics, digital health and services to reduce overall healthcare costs. Lim said sustainability awareness among private banking clients has been rising rapidly in recent years amid the global initiatives to fight climate change. Furthermore, the shock of the Covid-19 pandemic further prompted many clients to reassess their roles in society and their relationship with the environment. In fact, the pandemic disruptions offered a catalyst to induce clients to learn more about ESG investing, as they are looking for more sustainable and resilient investment returns in uncertain times, Lim said. ‘We believe more and more investments will be channelled into these areas in the next couple of years in my opinion. We have also been working with clients to identify multi-year structural themes and look for suitable thematic funds or ETFs to represent these themes through our rigorous due diligence process,’ she added. In 2021, over 25% of new additions to HSBC’s product suite have been ESG ETFs covering clean energy, water, gender equality, green bond, for example. ‘There are definitely interests among clients to invest in thematic ETFs,’ Lim said. ‘Thematic ETFs are cost-effective and provide quick market assess.’ When weighing active versus passives for thematics, Lim recommends investors have exposure to both in their portfolios to optimize risk-adjusted returns. She said passive works well only for certain themes, not for all. For beta exposure in a broad and well-defined sector, perhaps the passive route is a better choice. ‘However, if you want to invest into micro or emerging themes where there will be huge dispersions among companies - for example in artificial intelligence, electric vehicle, and green mobility - active selections will help avoid idiosyncratic risks,’ she added.
by Audrey Raj
All in
The circular revolution
Thematic ETFs are cost-effective and provide quick market assess
Lombard Odier also understands that a transition towards a circular economy requires efforts to achieve zero waste and that related investment opportunities will be found in the waste management sector, but not limited solely to recycling. ‘The entire waste management hierarchy can unlock value, preventing waste through product redesign and re-use. We are interested in business models that adopt products as a service, produce biodegradable packaging and use upcycling, or material recovery,’ Urban said. Within this, Asia is a key area of focus for the bank, as the continent drives up to 40% of the world’s consumption. ‘In China, circular economy investment opportunities present themselves clearly in the electronics and textiles industries. China produces 39% of the world’s electronics, requiring huge amounts of rare earth metals. A growing middle class increasingly demands more products: over 70% of urban citizens now own smartphones. While their domestic mining output is among the largest in the world, material recovery from e-waste would reduce supply chains risks. According to the Ellen MacArthur Foundation, China’s 240,000 tonnes of electric vehicle (EV) battery waste in 2020 is set to double by next year. Chinese recycling companies such as GEM, and battery producers such as BYD, can play a key role in scaling the waste management industry,’ said Urban. In textiles, China has dominated global production for years and is increasingly becoming the major consumer, he continues. ‘The sharing economy has spread to fashion, popularised by examples such as YCloset that are seeking to copy the model of Rent The Runway in the US. Innovative technologies such as 3D printing, robotics and advanced chemical recycling processes are also increasingly employed across the Asian manufacturing space, improving resource efficiency in the supply chain.’
HSBC Private Banking’s Lina Lim is putting the money down on four secular growth opportunities
At family office Maitri Asset Management, CIO Ankit Khandelwal views the circular economy theme through the lens of secular growth themes climate change, 5G and ageing populations, as well as cybersecurity and millennial behaviour. On the back of growing support from governments around the world, he sees opportunities in companies in equipment manufacturing, technological solutions providers, materials, utilities, battery and energy storage spaces, as well as EVs, bioplastics and sustainable packaging. ‘Companies that embark on a sustainable delivery of services of energy, waste and water etc., are a very important part of the circular economy. As an example, it’s not just about producing clean energy only – having smart efficient grids which reduce energy losses, and are not built at the expense of the environment, are equally important considerations,’ he said. Calling it the driver of the fourth industrial revolution, he also highlights how 5G will bring about increased efficiency of networks that will allow other new technologies to advance considerably. Subsequently, equipment and infrastructure providers, semi-conductors, testing equipment providers, device manufacturers will benefit from this progress. ‘Through a circular economic model, those building the 5G infrastructure may find new ways to accelerate the path to their carbon-reduction goals, while complementing other data centre initiatives,’ he continued. Finally, with the global 60+ population expected to double by 2050 and triple for the 80+, sectors such as wellness, healthcare, medical devices and pharmaceuticals are obvious beneficiaries. Less obvious perhaps are waste management, energy consumption and material consumption, given the fact that people are living longer and in closer proximity in urban centres, all of which are pivotal to a circular economy.
Lina Lim
From an investment perspective, it’s a big multi-sector theme, with a great deal of opportunity. As discussed in the accompanying chapter on next-generation food, nutrition and healthcare, food is a prime example of an industry that needs to be transformed, not least to reduce waste, but to adapt to new consumer behavioural patterns efficiently and sustainably. ‘Fast urbanisation of Asian populations leading to the emergence of the middle class is profoundly changing individual culinary habits, with increased awareness to health-conscious considerations. It will, for example, drive consumption of fresh products (fruits and vegetables), quality protein food and more high added valued food staples. Consumers are also more connected. Mobile phones and the internet give Asian consumers a unique way to consume in an informed manner, affecting everything from small grocery outlets to e-commerce,’ said Nicolas Donnet, director of financial strategies advisory for Bank J. Safra Sarasin in Asia. Investment opportunities in the circular economy overlap neatly with Lombard Odier’s interest in food systems, said Michael Urban, a senior sustainability analyst at the bank. ‘Agriculture can help to restore the bio-economy, bring about better nutrition and reduce food waste. Furthermore, nature-based solutions could unlock $4.5tn in annual business opportunities by 2030, according to the Food and Land Use coalition. Wildlife restoration and better wastewater management are also central to our transition away from wasteful, linear economic systems.’
Waste not, want not
BIG CIRCLES
Going into 2022, which thematic trends will be the winners and losers? How can we ride on changing consumption trends globally and in China? And should we be betting on India right now? Prashant Bhayani from BNP Paribas Wealth Management gives his take. The chief investment officer for Asia is recommending investors to watch out for traditional and technology infrastructure themes in the US, Europe, and China as they increase spending. Travel is also starting to pick up, along with luxury goods expenditure, and telemedicine won’t go away, Bhayani said. ‘There’s going to be companies in China that benefit from mass consumption. ‘I think India is an overlooked market in the Asian context because China clearly gets a lot of attention. It is a massive domestic consumption opportunity and there are huge infrastructure needs in India,’ he said.
Talking shop
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For a core-satellite portfolio construction, a core portfolio of traditional diversified stock and bond funds make up the bulk of the portfolio while investors choose “satellite” thematic funds that they invest in alongside the core - primarily in the equities side of the portfolio. Another option involves investors replacing some, or all, of their global equity exposure with thematic exposure. We believe this is the most common approach as it is best suited for investors who construct their portfolios by geographical regions. This approach can be thought of as a ‘dip-toe’ strategy or an introductory step to incorporating thematics in a portfolio, with minimal changes to the portfolio design and construction process. This approach can be implemented using i) one or more individual thematic funds or ii) a multi-thematic fund. For Investors who truly believe in the long-term structural trends, a third, and more innovative, option is to make thematics the core of the portfolio. This setup allows investors to tailor their long-term strategic allocation to what matters most to them. The blend of themes here can include specific issues like aging, regional and sector convictions, style factors, and sometimes single stocks. The resulting equities portfolio is still diversified but ultimately more customized than what might be arrived at by relying primarily on broad index funds. Alongside the customization embedded in the portfolio design, this type of construction also allows investors to manage active risks, take advantage of shorter-term opportunities or rely on a more tactical approach to portfolio management. This approach suits investors who believe that starting portfolio construction by thinking about geographical allocation is outdated in an increasingly globalised world.
Constructing a portfolio with thematic funds
“Crossing the Chasm”—Moving From Concept to Profitable Business at Pace
Regardless of how a portfolio is constructed, thematics ultimately allow investors to align their investment portfolios to their goals whether those be capturing mega trends as they happen or simply including ESG factors in their investment strategy.
ACTIVE
For example, within megatrends like climate change, investors interested in a sub-topic like sustainable energy, where the theme is relatively loosely defined and there are a wide range of stocks within the universe, relying on an actively managed thematic fund may be a better approach to capture opportunities. An active solution gives broader exposure to companies which are enabling the transition to a lower carbon economy, from clean power to energy efficiency and clean transportation companies. Alternatively, if an investor could opt to narrow the lens to a more well-defined theme (e.g. clean energy), an index solution would provide more concentrated exposure to the established players within the industry. Simply put, investing for the future by relying on investment formulas from the past doesn’t make sense. Thematic funds have emerged as a way to better align portfolios to innovation, sustainability and the trends that will define the new economy. For investors who want to make the most of these funds they need to start by defining what issues matter most to them. From there, BlackRock’s platform of thematic solutions can be mixed and matched to build a portfolio that aligns to an investor's goals without sacrificing diversification. Learn more about BlackRock's range of active and index thematic solutions. If you want more information or insights on thematic investing, click here to leave your contact and we will be in touch. Alternatively, please reach out to a member of the BlackRock Private Bank Distribution team below:
Important Information This material is prepared by BlackRock and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of October 2021 and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non-proprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by BlackRock, its officers, employees or agents. This material may contain ’forward looking’ information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. This material is intended for information purposes only and does not constitute investment advice or an offer or solicitation to purchase or sell in any securities, BlackRock funds or any investment strategy nor shall any securities be offered or sold to any person in any jurisdiction in which an offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. Investment involves risks. Past performance is not an indication for the future performance. In Hong Kong, this material is issued by BlackRock Asset Management North Asia Limited and has not been reviewed by the Securities and Futures Commission of Hong Kong. In Singapore, this material is issued by BlackRock (Singapore) Limited (company registration number: 200010143N). This advertisement or publication has not been reviewed by the Monetary Authority of Singapore. ©2021 BlackRock, Inc. All Rights Reserved MKTGH1021A/S-1858284
Investors are increasingly turning to thematic funds in order to tailor investment portfolio exposure and align their investments to their values. Many investors understand that the megatrends shaping the future have changed and the world is increasingly focused on issues like sustainability or technological innovation. Thematic funds offer investors the ability to increase their exposure to megatrends in a variety of ways.
Thematic funds are increasingly popular with investors, here are strategies to make the most of your exposures
There is no right or wrong way to invest with thematic solutions. Investors can choose active, index, or a mix of both approaches. The first question an investor should ask is - what themes matter most to me? BlackRock's platform of thematic solutions allows investors to drill down to single theme or construct a multi-thematic portfolio reflective of a group of trends they think are most important. In general, investors should consider the below three criteria and guideline when choosing between active and index solutions:
Active or index, which is best?
Join David Eiswert, Portfolio Manager, Global Focused Growth Equity Strategy, and Laurence Taylor, Portfolio Specialist, on 24th June at 2pm, BST, as they share their insights on the outlook for global equity markets.
Hong Kong investors
Thematic funds are usually unconstrained, diversified sources of return with exposure to companies that should experience above-average earnings growth. Including thematic funds in your portfolio, we believe, have the potential to provide better risk adjusted returns versus broader equity markets, provided one 'backs the right themes’, over the long term. There are three primary ways investors can construct a portfolio using thematic funds - core-satellite, replacing part of the equity exposure with thematic strategies, or using thematics as the core.
1. 2. 3.
INDEX
Better suited approach considerations
BROAD
NARROW
How broad is the investment universe?
YES
NO
Is there likely to be high divergence in the performance of companies related to the theme?
Is there a significant opportunity to participate in IPOs
Source: BlackRock, September 2021, For illustrative purposes only.
Singapore investors
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HONG KONG: Fanny Lee Head of Hong Kong Private Banks Distribution E: fanny.lee@blackrock.com
SINGAPORE: Mandy Lee Head of Singapore Private Banks Distribution E: mandy.lee@blackrock.com
iSHARES: Georgina Mitchell iShares Specialist, Asia ex-Japan Wealth Distribution E: georgina.mitchell@blackrock.com
BlackRock Private Bank Distribution team
NEXT-GENERATION HEALTHCARE
Asia is a unique conundrum. It has a population of around 4.6 billion, around 60% of the world’s population, which is expected to grow to 5.3 billion by 2050. Two of the continent’s major economies – China and India – combined have a population of nearly 2.8 billion. This trend will only swell the twin challenges of feeding the continent and keeping it healthy, while sustainably managing resources and environmental impact. In terms of land area, Asia covers 29.4% of planet earth, yet despite growing demand for agricultural products, none of the world’s top 10 largest agriculture companies are Asian. Limited arable land and inadequate water resources in Asia form a natural ceiling to agricultural supply. Additionally, agriculture is a major part of the climate problem, generating 19% to 29% of total greenhouse gas emissions, according to the World Bank, a percentage that could rise substantially without action. Additionally, one-third of food produced globally is either lost or wasted. Addressing food loss and waste is critical to helping meet climate goals and reducing stress on the environment.
by Neil Johnson
Health is wealth
Healthier livinG
Our food system must transition towards a circular, lean, inclusive and clean (CLICTM) paradigm. This is particularly important in Asia
Nicolas Donnet, director of Financial Strategies Advisory for Bank J. Safra Sarasin in Asia, also sees opportunities in the nutrition and food component space, from farming to agribusiness, with a particular focus on key regional markets in China, Japan and India. ‘India has been transforming and revolutionising the traditional agriculture business to include innovation and high-tech solutions of its farming industry (vertical farming, resilient crops and improved fertilisers). The sector is transitioning into agribusiness to improve productivity and reduce water consumption,’ he said.
The next-generation healthcare, nutrition and food markets are expected to grow exponentially
Driven by Covid-19 exposing the shortcomings of existing healthcare systems and the subsequent increases to government spending – as well an expanding middle class and ageing populations – Asia’s healthcare sector is heating up. UBS’s Choi is constructive on the global healthcare industry overall, but views longer-term growth prospects in Asia as particularly attractive, forecasting the regional healthcare market to double to $4.2bn in 2024 vs 2017 – a 12% CAGR (2017-2024) versus 5% for global healthcare over the same period. ‘Within the Asian healthcare space, we favour telemedicine and innovative drugs, with contract research organisations being our preferred avenue for exposure,’ she said. The sector remains an ongoing focus for Bank J. Safra Sarasin in Asia too, noting how Gen-Z is more devoted to spending on a range of innovative health products, such as infused tea and vitamin supplements. ‘JD.com reported antioxidant supplements bought by Gen-Z on its platform increased six-fold year-on-year in 2020, while smart healthcare tools, liver protection products and anaemia improvement products are also popular,’ Donnet said
Michael Urban
‘Feeding the world against the backdrop of growing consumption and natural resource constraints requires a focus on sustainable solutions and increased use of technology in food production,’ said Rishabh Saksena, head of investment specialists, Asia Pacific at Julius Baer. ‘Specific sectors to look at in the FoodTech/AgTech space would be plant-based/lab-grown meat, alternative dairy, vertical farming, precision farming, fertilisers and food waste solutions. Given the niche nature of these segments, selective investment opportunities may be both in public and private markets.’ Michael Urban, a senior sustainability analyst at Lombard Odier, puts it more bluntly: ‘The food system is no longer fit for purpose. Current agricultural production is based on carbon-intensive commercial practices that rely heavily on agrochemicals and monocultures to maximise yield. Our wasteful, idle, lopsided and dirty agricultural model has put pressure on numerous planetary boundaries: biodiversity loss, deforestation, water usage, agrochemical pollution and climate change,’ he said. ‘Our food system must transition towards a circular, lean, inclusive and clean (CLICTM) paradigm. This is particularly important in Asia. For instance, recent research suggests that the South and Southeast Asian region has “emitted the greatest food-production-related emissions (23%)”, mainly due to the region’s dominant role in rice cultivation, the most carbon-intensive plant-based commodity.’ Transitioning towards a CLICTM food system presents numerous investment options, Urban continues. ‘Regenerative and precision agriculture offer exciting supply-side developments. Large multinational food companies such as Danone, with supply chains extending throughout Asia, are nurturing regenerative practices in the region, helping to restore soil health, preserve biodiversity and sequester carbon.’ Precision and smart farming techniques can also offer more technology-focused solutions to the environmental problems posed by intensive agriculture. ‘AgTech startups across Asia are applying technology to make farming more sustainable; from Senzagro’s smart irrigation system in Sri Lanka, to Village Link’s mobile technology applications in Myanmar,’ he said.
Investing in transition
An appetite for the future
UBS Global Wealth Management focuses on three areas for food-related investing: • Producing more with less: using less land (stopping deforestation) and raising productivity, adaptation to climate change and carbon farming opportunities. • Supply chains: food security, emissions and waste reduction. • Low carbon impact, animal welfare and health-conscious consumption ‘A key investment area has been plant-based and cell-based meat. We believe this will continue to grow in scale and market penetration, but recommend balanced exposure across the supply chain, including enabling technologies within incumbents,’ said Stephanie Choi, a sustainable & impact investing strategist in UBS Global Wealth Management’s chief investment office. Within such a context, there are decisions to be made around investing in established food companies versus younger more innovative ones, with both capable of playing roles in transitioning to more sustainable development models, while presenting different risk/reward opportunities. ‘For example, established companies may bring scale and the improvement of sustainability management for these companies may yield broad stakeholder benefits and reduce the negative environmental and social impact of the status quo. Meanwhile, innovative solutions presented by newer companies may have promise in driving positive change, but the inherent operational risk is high, so this brings lower certainty of expected return as well as impact,’ notes Choi.
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BY Audrey Raj
Climate change is one of the biggest challenges faced by our generation. This challenge is providing opportunities for investors in the world of thematics
Learn more about BlackRock's range of active and index thematic solutions. If you want more information or insights on thematic investing, click here to leave your contact and we will be in touch. Alternatively, please reach out to a member of the BlackRock Private Bank Distribution team below:
Answering the great inflation question – whether it is a temporary threat or a long-term problem – is dominating most client conversations today. Leo Wealth’s chief investment officer, Harmen Overdijk, believes long-term inflation will be higher than seen in the past 10 to 15 years. As a result, the $4.3bn independent asset manager is betting on three themes to hedge against rising inflation. ‘The first one is commodities which will act as an inflation hedge,’ Overdijk said. ‘The second theme that will definitely profit from inflation and is also seeing very low valuations now is the banking sector. We are actively making thematic bets on the banking sector, especially outside the US, like Europe and Asia. ‘The third sector where the impact is a mixed blessing is the real estate sector. We have thematic tilts in our portfolios to invest in real estate investment trusts because real estate earnings will evolve with inflation.’ Overdijk added that while higher inflation will be positive for real estate, it will eventually lead to higher bond yields and higher interest rates, which will then hurt listed real estate. However, higher interest rates could still be positive for banks and commodities, he said. Leo Wealth is also investing in bitcoin through exchange-traded funds. Its inflation hedge commodity basket includes gold, bitcoin, platinum and some base commodities, and Overdijk is seeing quite a bit of uptake. ‘We are not exactly crypto believers, but we are seeing it’s attracting a lot of investment flows. From an investment perspective, you would want to have some exposure and that is what we have been telling our clients.’ Given that value stocks tend to outperform growth stocks when inflation is higher, Overdijk said the high-growth consumer sector is likely to underperform in a high-inflation environment. ‘The fact that we had such low interest rates means that the discount rate is low and that warrants a higher valuation. So, if I had to make a bet on which market segment can underperform in an inflationary environment it would be large cap tech, although not everything is called technology anymore - its consumer technology.’ Another problem for the mega cap tech stocks is increased regulatory scrutiny. This is beginning to happen in China, where regulators are putting pressure on large-cap tech companies such as Tencent and Alibaba. The move has wiped out billions of dollars in market value from Chinese tech giants. Overdijk feels this is not just a China specific problem, but a global issue that could very well unfold in the US and Europe as well. ‘We think we will see more regulations on large cap consumer tech companies, combined with higher inflation, it is not great for these types of companies. So, if there is one sector that we believe that could underperform it is mega cap tech,’ he said.
Thematics: an inflation hedge?
Sustainability will continue as a major trend, but the question mark is whether a lot of that growth expectation is already built into prices
Harmen Overdijk, Leo Wealth’s chief investment officer explains why the firm has doubled its allocation to thematics in just three years
Harmen Overdijk, Leo Wealth
Increasing popularity
Three years ago, thematics took up to 20% of portfolio exposure, but today Leo Wealth is recommending 40%, driven by increasing client interest. When examining the broader thematic spectrum, the firm is betting on sustainability and its underappreciated trends. Overdijk said trends that have been around for much longer, such as renewable energy, are maturing, and future returns will be lower because of high valuations. ‘Sustainability has been going on for quite some time and it will continue as a major trend. However, the question mark as an investor is whether a lot of that growth expectation is already built into prices,’ he said. ‘In the last couple of years, we have seen the stock prices of renewable energy companies outperform traditional energy companies by a huge margin. So, the question is whether it’s an area that will make the biggest investment gains. ‘We started looking at different parts of the sustainability angle, for example, to move to a fossil-fuel-free transportation network and electric vehicles, and power generation.’ Other interconnected aspects of sustainability are agriculture and food production trends. Leo Wealth believes a lot of investment will go into those sectors. Healthcare innovation is also of interest to its clients, particularly health tech companies and medical equipment developers. ‘This ties in with the next part of sustainability, which is digital infrastructure. This will be made possible by 5G technology. 5G is so powerful that it ties in with other trends, for example, to make agricultural developments smarter,’ Overdijk said. ‘In a lot of countries, 5G networks are now being built out, with Asia the most aggressive, like China and Indonesia. The US and Europe are almost behind in this game. ‘I would rather have a slightly broader definition of thematics than a very niche definition. That allows a fund manager a bit of flexibility for diversification.’
With tech being the undisputable sector of innovation over the past 20 years, BlackRock looks through the thematic approach to the sector where ETFs can be used effectively to capture opportunities.
Investment involves risks. Past performance is no guarantee of future results. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this video is at the sole discretion of the reader. International investing involves additional risks, including risks related to foreign currency, limited liquidity, less government regulation and the possibility of substantial volatility due to adverse political, economic or other developments. The two main risks related to fixed income investing are interest rate risk and credit risk. Typically, when interest rates rise, there is a corresponding decline in the market value of bonds. Credit risk refers to the possibility that the issuer of the bond will not be able to make principal and interest payments. This video is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The information and opinions contained in this video are derived from proprietary and non-proprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. Index performance is shown for illustrative purposes only. You cannot invest directly in an index. Company name is only for explanatory purposes and does not constitute as investment advice and is subject to change. In Hong Kong, this video is issued by BlackRock Asset Management North Asia Limited and has not been reviewed by the Securities and Futures Commission of Hong Kong. In Singapore, this video is issued by BlackRock (Singapore) Limited (company registration number: 200010143N). This advertisement or publication has not been reviewed by the Monetary Authority of Singapore. ©2021 BlackRock, Inc. All Rights Reserved. BlackRock® is a registered trademark of BlackRock, Inc. All other trademarks are those of their respective owners. MKTGH1021A/S-1886640
CIRCULAR ECONOMY
A circular economy is as lofty an ambition as it is essential. Transforming our throwaway economy into one in which waste is eliminated, resources circulated and nature regenerated is perhaps the great challenge of this age. Our linear economic models have remained unchanged and, until recently, unchallenged since the industrial era. We extract resources, use them, then throw them away, which is wholly unsustainable if climate warming, water shortages, and destroyed ecosystems are to be permanently avoided. This is where the notion of a circular economy comes into play, one that ‘closes the loop’ by promoting the full life-cycle of materials and redesigning products and operations to encourage greater reuse and recycling.
Come full circle
In China, circular economy investment opportunities present themselves clearly in the electronics and textiles industries
The notion of a circular economy in Asia may seem daunting, but the investment foundations are there
ESG & ME
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Arjan de Boer from Indosuez Wealth Management believes most themes focused on ESG will generate solid returns in years to come – but if he had to pick one, it would be energy transition. ‘There is the ever-pressing need at the moment to reduce our carbon footprint,’ says the head of markets and investment solutions, Asia. ‘And this will require huge investments in solar power, wind turbines, electric vehicles and clean batteries to power those vehicles.’ Another area is waste management where countries like Malaysia, Indonesia, China, and Hong Kong can no longer allow exports. In the US, social elements and infrastructure will benefit from the Biden administration post-Covid. ‘Private real assets with strong ESG credentials as well as those with a focus on the circular economy is also a case in point,’ de Boer says.
By Audrey Raj
Brightest of them all
Of all ESG themes, energy transition has the most promising future, according to Indosuez’s Arjan de Boer
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