At the heart of thematics sits one idea – disruption. In a world of low nominal growth and low returns, the risks of corporates being disrupted becomes ever larger and the results ever more obvious. Not unsurprisingly, we are therefore seeing a marked increase in investor interest in thematic investing.
But disruption need not be just about new technologies; it can also arise from changes in politics and consumer behaviour including demographics. So what should we expect this year? Berenberg summarised their thoughts, with 2018 promising plenty of catalysts and opportunities in our existing themes as well as the emergence of new themes.
Existing themes – healthcare and blockchain to the fore:
Digital healthcare is the most underrated of themes by the market. In contrast, batteries in 2017 saw peak electric vehicle hype but 2018 should see growing awareness of the much larger grid storage opportunity. Blockchain to date has been all about cryptocurrencies but 2018 may see a greater focus on the underlying technology and the enterprise opportunity.
This year sees agtech come to market, with the commercialisation of a wide range of technologies – from ‘see and spray’ equipment to the first robotic tractors. A synchronised global economic expansion may see interest in demographics wane but the emerging problem of declining working populations is not going away nor is lower for (a lot) longer interest rates.
New themes – plastics and subscriptions:
Disruptive technologies will always be popular but here are two that have cropped up in recent client and team discussions:
1) Plastics. China’s environmentally-driven big clean up risks disrupting many industries including plastics. Its banning of imports of recyclable plastic may mark the tipping point in global plastic usage.
2) Subscriptions. Smart phone addiction has conditioned consumers to buying goods and services through subscriptions. So what comes next? Rail season tickets are common so why not other modes of transport such as electric vehicles and air travel?
As the themes become more advanced, whole sub-sectors could see their business models come under threat. Examples of this include:
- agtech – agchem companies;
- batteries – automotive OEMs;
- blockchain – international remittances,
- security market infrastructure;
- demographics – banks;
- digital healthcare – hospital groups;
- loyalty programmes – credit card issuers;
- micro-grids – utilities with centralised generation.
While these are long-term trends, 2018 could be the year when some of these start to feel the pain.