Megatrends possess an aura of inevitability for Insync

From

Monik Kotecha

Over the next 15 years we will experience more change than ever in human history.

Simply investing along country and sector lines will no longer provide the potential differentiation or the potential outperformance of benchmarks that it once did.

Insync invests in megatrends to pick stocks that are more likely to outperform their peers in the future.

Megatrends possess an aura of inevitability. Like a tsunami they are unstoppable, are enormous in size and have a far and wide-reaching impact. In an uncertain world they provide greater certainty as to where the world is heading.

By 2030, 8.6 billion people will walk the earth:

  • Around three million people move to cities every week
  • Cities will become bigger and we will have more of them – 43 megacities
  • Fertility rates are declining in most parts of the developed world and life expectancy is increasing
  • By 2030 there will be in excess of one billion people over the age of 65
  • Millennials and centennials (born after 1981) are starting to dominate with distinctly different consumer preferences than previous generations (craft beer over major brand beverages: organic products with proof of provenance)

Identifying megatrends is not as easy as it first appears because it is necessary to separate long-term trends with fads and themes, where the latter two tend to be more transient and less sustainable. Many megatrends also remain generally too broad to be coherently analysed for investment purposes. Instead, Insync focus on opportunities where the impacts from one or multiple megatrends amplify structural growth along economic value chains producing observable winners.

The rise of India’s middle class, where some 600 million Indians are currently poised to become “middle class” over the next decade, combined with the expanding middle class in China, will reshape the composition, and the orientation, of the global middle class for the foreseeable future. Their combined spending power over the next decade will exceed US$15 trillion. An additional powerful sub-trend is that the gender spending-power gaps will narrow in both countries over the next decade.

Anticipating the size of emerging middle-class segments worldwide with reliable and accurate data is critical.  Insync identified the prestige beauty industry as an industry profitably benefitting from this collision of megatrends. Women in China aged between 15 and 65 spend US$23 annually on prestige beauty compared to US$255 in the US on average.  The gap has started to narrow at an accelerating pace.

The Insync global equity funds are exposed to 14 global megatrends with typically one or two stocks per megatrend.

 

By Monik Kotecha, CIO

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