Supertrends pave way to a post-Covid world

The idea of thematic investing – identifying the supertrends which are shaping our economies and societies and using them as a basis for investment strategies – has been an area of focus for private banks when building client portfolios for some time. The Covid-19 pandemic has only boosted this approach, with investors reassured by the long-term nature of these strategies.

Healthcare has long been a staple of these supertrends, and one which has been in the spotlight during the pandemic as it encompasses the vaccines which have accelerated the recovery. “I think we will see great future developments in healthcare,” says Nannette Hechler-Fayd’herbe, chief investment officer, international wealth management, at Credit Suisse.  

“For example, the messenger RNA technology that was deadlocked with the Covid vaccination progress is not only well suited for future vaccine applications because of the speed and the versatility, but we are also excited about what it can do in areas like oncology, regenerative medicine or taking on previously undruggable intercellular targets. This makes it a key biopharmaceutical technology that investors absolutely may seek to have exposure to post-pandemic.”

Many households have seen savings rates go up during the pandemic, and as economies open up there is a fair chance this money will be directed towards all those things people were unable to do during lockdowns, says Ms Hechler-Fayd’herbe. 

“I am really optimistic that the leisure, travel and hospitality sectors will bounce back over time as restrictions are gradually lifted,” she says, though warns that remote working, digital meetings and the environmental benefits of fewer trips mean business travel may not return to pre-Covid levels.

China’s influence

The continued growth of China is one factor investors cannot ignore. “China is undoubtedly a driving force in so many sectors,” says Ms Hechler-Fayd’herbe. The country is an industrial powerhouse, a huge consumer market and a tech giant. There are risks to investing in the country, as recent crackdowns on some of the big tech stocks or the new rules surrounding after-school tutoring show, but Ms Hechler-Fayd’herbe believes China will continue to see a lot of entrepreneurship and innovation.

Another theme she pays particular attention to is demographics, especially ageing populations and the rise of the next generation of investors. Since 2017, Credit Suisse has been focusing on equities in companies which not only treat the diseases associated with old age, but also the providers of insurance and asset management solutions which help fund the rising healthcare costs that come with an ageing population. 

While having a concentrated approach targeting certain sectors, it is also vital to have a diversified approach to investment, cautions Ms Hechler-Fayd’herbe, and this is possible in the ‘silver’ economy. “For example, therapeutics and devices are certainly more defensive, being a more low volatility type of investment when you compare them with silver consumption or tourism, which are more cyclical.”

Investors should also note that this silver economy is also very much an emerging markets story. “Two out of three incremental seniors by 2050 are going to live in what we label today as emerging markets and most of these people will be in Asia, so as investors we do need to have sufficient exposure to these markets,” she adds.

Creating a better world

Meanwhile the younger generation of investors tend to be very interested in sustainability and ESG. 

“We are seeing an enormous wall of capital wanting to get invested behind climate change mitigation and that has only been accelerated through the crisis,” says Marisa Drew, chief sustainability officer at Credit Suisse. “I think the reality has set in about how interconnected things like pandemics are to the environment. It has been a bit of a call to action and our clients want to use their capital to try to make change and create a better world.”

With countries around the world now allocating considerable sums towards promoting and accelerating investment in new technologies and green infrastructure with the goal of building back better, this provides an enormous opportunity for investors. 

“We always say it is a sound investment theory to look at where you see enabling conditions or fundamental underpinnings that should drive value, and political direction and regulatory intervention are fantastic places to follow, where you can invest your capital behind those actions,” she says.  Ms Drew points to the proposed infrastructure spend that is working its way through political circles in the US, but also highlights what happened in China with electric vehicles (EV).

“When China said they were going to ban petrol cars within five years, in just one nano second they created a multi-hundred billion dollar industry to invest behind EV manufacturers, component parts manufacturers for energy infrastructure and EV infrastructure,” she says. “All of this political will does create opportunities and we are often saying that this getting behind climate change mitigation is one of the greatest investment opportunities in the history of our generation.”

The way we produce, consume, package, deliver and waste food is one of the biggest contributors to carbon emissions and also biodiversity loss, says Ms Drew, highlighting this as another area of opportunity for investors to put money behind companies which are delivering goods and services with better outcomes. She also points to the ability of technology to help make agriculture much more efficient.

Women in wealth

Just as the younger generation of investors are naturally drawn to ESG and impact investing, female clients also seem to have a natural affinity to these areas. “I hate to overgeneralise but our female clients have a higher propensity at the outset to want to make impact investments. I think what is maybe underpinning that to some degree is most women still have the primary burden of caregiving,” says Ms Drew.

The financial industry has not been very successful at all in engaging women with their money and investments, says Ms Hechler-Fayd’herbe. “In fact, research shows that the emotions women associate with financial planning often are stress and anxiety.”

Banks should do more to establish long-term relationships with female clients that are founded on trust and openness, and this could mean investing with the supertrends in mind could be particularly beneficial to women.

“Feeling connected to their investments can play a critical factor for women in nurturing their interest and making them more comfortable with securities, with understanding financial instruments and help them steer towards a more responsible investment activity,” she says. This is especially true in equities where women sometimes may be apprehensive because of perceived risk. 

“The supertrends are a very intuitive, you could argue an entrepreneurial, way to invest in equities because it builds on societal trends that women see in the world around them every day and they understand how this can create both business opportunities but also, importantly, investment opportunities,” adds Ms Hechler-Fayd’herbe.