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Inflection point for mega-trends crucial

Investable mega-trends were poised to profoundly impact on investment strategies within the next five years, but identifying their turning point was key to capitalising on the emerging opportunities, according to a Zurich Financial Services Australia white paper.

The group’s “Investable Mega-trends” white paper, released last week, identified the opportunities presented by the connected consumer, the smart corporate, demographics and the ageing world, Asia rising and new power.

During a media briefing in Sydney last week, Zurich senior investment strategist Patrick Noble said: “The benefit for investors who might recognise it [the opportunity], but not quite get the next leg of what might be a good or bad investment and at what valuation, is that there still might be some natural selection as we go through this process.

“It is [about] having an investment framework and if you don’t have that yourself, then I think asset managers who do look at these trends, as to how organisations compete and interact with each other around the world and you can see therefore who will be the likely beneficiaries, in a way are taking the investment lead.

“That’s obviously what I’d call the listed market.”

Noble said in order to know when something was investable, managers and investors needed to identify its inflection point.

“When Facebook came to market a few years ago, everyone was seeing the shift from PC to mobile, but Facebook was yet to have any real strategy as to how to monetise and get their users engaged on a mobile platform,” he said.

“Three short years later, [mobile] is nearly 75 per cent to 80 per cent of their digital advertising revenue, so it’s been an incredible hockey stick turnaround and the share price has gone from sub-$20 to $90 and above – nearly a fivefold return for investors in a very short period of time, but not too many people were looking at Facebook at that inflection point.”

Zurich investment strategist and white paper author Charles Stodart said the paper aimed to provide long-term investors with a guide to those sectors that should be on their radar if they wished to make strategic choices for wealth creation over the long term, in an environment where change was ever more rapidly occurring.

“I think several of these trends are quite well known, so we recognise that they’re not unfamiliar to investors, but they are important to know [about] enough that people should have the ability to debate them in more depth, which is what we’re trying to do with this piece,” Stodart said.

“We’re trying to elevate and enhance the debate so that people can make better investment decisions.

“We feel these are five mega-trends which are fundamentally important to investors today and we think they’re relevant because of the changes that are happening within those particular spaces, but we think they’re interesting because they’re investable and that’s key.

“These mega-trends will evolve and become more significant over the next five years.”

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