After an extremely busy 2021 in the financial markets, fiscal 2022 promises to be more challenging. “The investment climate seems to be getting darker and darker,” said Frederic Rollin, Investment Strategy Advisor at Pictet AM, in a mid-May note. . is looming, and new Covid-related restrictions are hitting all of China, curbing growth.” As we close these pages, the CAC 40, the Paris market’s flagship index, is down 12%, the MSCI All Country World index, which reflects international markets, is down 16%, and the Nasdaq, an index of US technology stocks. , dropped by 25%…
Admittedly, the year is not over yet, but these bad numbers should remind us that the development of financial markets is never regular and, therefore, it is necessary to invest in the stock market for the long term. This is even more relevant when choosing thematic funds. After all, these products are built on very long-term megatrends that are structurally transforming society, such as demography, urbanization, digitalization of the economy… Based on this data, management companies determine promising areas for investment, since they are likely to benefit from above-average growth. Here are 5 themes for the future that you can use in small doses to diversify your portfolio.
1/ Bet on the future of the Internet with the Metaverse
We’ve only heard about it for six months, but the concept is not new. Metaverses are immersive virtual universes from the world of video games. “This is a natural evolution of the Internet, where the experience will become more immersive, instantaneous and three-dimensional,” explains Pauline Llandric, manager of Axa IM. Utopia? Not for Bloomberg Intelligence, which estimates this market at $500 billion and predicts an average growth of about 12% per year by 2024. There are several index funds (ETFs) registered in the US and Canada on this topic. Management company Axa IM recently launched the Axa WF Metaverse fund with a tight portfolio of 40 to 60 stocks. Managers target several subtopics: video games, social media, and work.
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“We are interested, on the one hand, in immersive and collaborative work environments, and on the other hand, in the use of metaverses in industry, in particular for prototyping,” clarifies Pauline Llandric. Finally, the fund includes the measurement technology with the players. in the world of payments, cyber security… How is it different from a standard technology fund? Smaller capitalizations and the ability to focus on several players not associated with the sector. “We’re investing in a health care player who does immersive rehabilitation,” the manager cites as an example. If a fund is too young to evaluate its performance, its profile tends to amplify market movements. Consume with moderation!
2/ Climate transition: many means
In 2015, as part of the Paris Agreement, 196 countries committed to limit global warming to well below 2°C below pre-industrial levels. To achieve this goal, the needs are enormous. Thus, states allocate significant funds to promote the ecological transition, as in the case of the European Green Deal. A huge project involving finance, funneling capital into key companies for the transition to energy. The craze is such that globally, climate-focused fund assets doubled last year to $408 billion, according to Morningstar. The offer is plentiful. The Financial Information Provider explains that there are several types of funds in this universe.
Among them are “low-carbon” products designed for companies whose activities are associated with low CO2 emissions. Other media give preference to companies whose products and services contribute to the energy transition. These include Pictet Global Environmental Opportunities (Pictet AM), Mirova Global Climate Ambition Equity Fund (Mirova) and Candriam Sustainable Equity Climate Action Fund (Candriam). The latter can work with renewable energy sources, as well as energy storage and efficiency, electric vehicles, etc. They are also involved in the entire value chain, from production materials to recycling. After rising 40% in 2020, then 24% in 2021, the fund is down 21% year-to-date. There are also a number of index funds (ETFs) linked to the Paris Agreement. To qualify for this title (the name of the fund then includes the term “PAB” for the Paris benchmark), these funds must have a carbon intensity of at least 50% lower than their investment population in the first year, and then achieve a decarbonization goal of at least 7% per year .
3/ Wellbeing: a topic with multiple approaches
While environmental and technological topics have been on the rise for several years, wellbeing is more recent. According to the manager of Allianz GI, this market is growing twice as fast as the economy. This term covers many fields of activity, including physical activity, healthy food and nutrition, medicine, health tourism … Thus, the approach of managers can take many forms. sports and fitness (clothing, equipment, sports clubs); food and nutrition; sports, recreation and entertainment. But other managers offer more targeted approaches.
Pictet AM has the Pictet Nutrition Foundation, focused on the food of tomorrow, or the Pictet Human Foundation, which aims to pursue a fulfilling life through leisure, education and care. More original management company Triodos IM has just launched a product focused on the well-being and development of children. Another possible aspect is well-being at work, for example with Sycomore Europe [email protected] (by Sycomore AM).
4/ Hydrogen, a key element of the energy transition
Why be interested in hydrogen? Because this gas, which can be stored and transported, is at the heart of the energy transition. Some see it as the fuel of the future. Although today it is mainly produced from fossil fuels, new production technologies make it possible to create “green” hydrogen, which emits few greenhouse gases. France has also developed a National Strategy for the Development of Carbon-Free Hydrogen, which provides financial support of 7 billion euros by 2030. The European Commission also has great ambitions in this area. The topic is still relevant and there are several products to bet on this trend. Several index funds exist, including the L&G Hydrogen Economy UCITS ETF or the BNP Paribas Easy ECPI Global ESG Hydrogen Economy UCITS ETF. The management company CPR AM also just launched a hydrogen strategy under the active management fund CPR Invest Hydrogen.
“We cover the entire hydrogen value chain, from green energy production to the downstream chain, i.e. end consumers,” explained its manager, Emmanuelle Zen, at the launch of the fund. In particular, the manager combines four dimensions in the fund: green energy production (wind power, solar panels, etc.); hydrogen technologies (electrolyzers, fuel cells, etc.) and components; production, storage and distribution of hydrogen; and end use through chips, automobiles or certain industrial companies… This fund represents sectoral (by industry, energy, materials…) and geographic biases in favor of Europe and Asia.
5/ Digitization, still relevant
Technology stocks have risen sharply in recent years, but have fallen sharply since January. Nevertheless, the topic of digitization retains all its appeal, as the process seems inevitable. It may cover different subtopics because managers have refined their approach. As such, Pictet AM highlights the need for information security through its Pictet Security Foundation. Pléiade AM has just launched a niche strategy for B2B cloud companies (PAM Cloud Revolution). The cloud “benefits from accelerating the digitalization of companies still in their infancy,” estimates the management company. Other interesting offerings include the Echiquier artificial intelligence fund, which invests in companies that participate in or benefit from the development of artificial intelligence.
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Sensitive souls abstain: Fund performance is meager: +79% in 2020, +8% in 2021, but – 44% since the beginning of 2022! Finally, Edmond de Rothschild AM offers a defensive profile big data solution based on the transformation of certain data-intensive business models.
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