Monday 07 May 2018
Thematic equities - Megatrends - Our future is emerging now... let's shape it together
The world is changing. The ageing of the population, the increasing scarcity of resources, the new emerging economies, the energy transition and artifi cial intelligence are all making the headlines, and are all megatrends. These issues are creating challenges for the future that are raising many questions. Governments, NGOs, companies and citizens are all affected, and our investments too.
CAN YOU EXPLAIN THE TERM MEGATRENDS?
This term “megatrend” was popularised in the early 80s by John Naisbitt, author of the eponymous bestseller “Megatrends”. It refers to the major transformations that have been taking place over several decades and are bringing about lasting change in the world we live in. At CPR AM, we group them into four categories: demographic & social changes, economic shifts, technological revolutions and environmental challenges.
All these changes must be responded to by companies, particularly by adapting their production and distribution methods.
YOU HAVE LAUNCHED CPR INVEST - MEGATRENDS IN DECEMBER 2017, CAN YOU TELL US A LITTLE MORE ABOUT THE FUND'S INCEPTION AND PHILOSOPHY?
Since the launching of CPR Silver Age in 2009, and the creation of a Thematic Equities centre of expertise for the Amundi Group at CPR AM in 2015, we have been establishing ourselves as leaders in thematic equity investment. When we present our strategies, two questions always come up: how do you identify and capture the right theme? How do you identify the right time to invest? By creating CPR Invest – Megatrends, we wished to offer a turnkey solution for investors that answers these two questions in particular. Megatrends is a fund of thematic equity funds that aims to capture the trends that we consider to be the most promising over the long term and are in line with the managers’ short-term convictions, according to the market cycle identified.
HOW IS THE INVESTMENT UNIVERSE DEFINED?
The investment universe is mainly made up of the thematic equity funds managed within the Amundi Group that benefit from these long-term trends. The Megatrends managers therefore profit from the managers' closeness to each theme and their continuous exchanges of opinions with each other. The universe currently includes the themes of the ageing of the population, the food challenge, new consumer trends, the emergence of the middle classes, new centres of economic infl uence, disruptive innovations in every field, urbanisation, energy, natural resources, and so on.
THE ELIGIBLE UNIVERSE IS VERY CONCENTRATED. HOW IS THE ALLOCATION DETERMINED?
CPR Invest – Megatrends’s allocation is determined monthly following the thematic allocation committee meeting attended by all the managers who make up the Thematic Equities team. The process is based on CPR AM’s macroeconomic scenarios and allows discussion and analysis of the events and trends for the sectors, factors & styles that might positively or negatively affect the universe. Each of the funds in the universe is first analysed qualitatively and quantitatively in order to identify its intrinsic risks and opportunities. The managers’ closeness to the funds within the universe is therefore a major advantage. By following these two stages the managers establish their convictions regarding exposure to each of the themes to be held. Each fund’s weight is then checked using a risk model developed internally, which combines volatility and correlation indicators. The final portfolio - composed of around 8 to 10 funds - therefore results from the combining of the riskadjusted convictions. This means that the final portfolio meets a two-fold objective in addition to its investment objective: structurally capturing the long-term growth potential of themes while adjusting the portfolio for risks and the market cycle. This boosts or tactically preserves the portfolio’s performance.
WHAT IS THE PORTFOLIO’S CURRENT ALLOCATION?
The environment of synchronised global economic growth should support the equity markets over the long term. Some sources of volatility remain in the short term, however. Investors are therefore looking for vehicles that benefit from specific growth factors decorrelated from the macroeconomic environment. Our main convictions are focused on our “Silver Age” and “Lifestyles” strategies.
These two funds directly linked to global consumption - spending by senior citizens and new ways of living & consumption patterns respectively - are particularly suited to the current market environment. We believe that Global Disruptive Opportunities is therefore a decorrelating asset as it invests in stocks that create new markets. Our exposure to Infrastructure is limited, on the other hand, as this sector is poorly served by the low interest rate environment, given that its stocks have a bond-like profile. The portfolio is currently composed of 10 funds.
A FEW WORDS ABOUT THE MANAGERS
Management is provided by Florian Peudevin and Guillaume Uettwiller. Florian and Guillaume participated to build the Megatrends' investment process and have managed the fund together ever since. Florian is specialised and participates in the management of the Ageing and Restructuring themes. Guillaume, for his part, participates in the management of the Silver Age themes. The managers’ closeness to the universe’s funds is essential for the management of this internal fund of funds. The two-person team can in this way draw on the whole team’s expertise.
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4 MAJOR FORCES RESHAPING THE WORLD
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