Automation, digitisation and artificial intelligence are the top investment themes for global institutional and family office investors who see these sectors shaping the economy over the coming decades, according to a new study.
About 95 per cent of investors ranked these trends as the leading investment themes, followed by ageing populations, which was mentioned by 69 per cent of investors. Climate change was the third-most highlighted trend, picked by 65 per cent, according to Investcorp’s second annual What’s Next? Investment Trends for the Future report.
The Bahrain-based alternative asset manager conducted the global survey in partnership with Mercury Capital Advisors, IMD Business School and Banque Pâris Bertrand to gauge institutional investors’ sentiment and explore the economic trends driving investment allocations.
“Institutional investors’ view of the major trends that are to shape the global economic landscape over the next three decades can give us significant insight into where capital is likely to flow in both the near- and long-term,” Rishi Kapoor, Investcorp’s co-chief executive, said.
While digitisation and AI are areas ripe for investments, the ageing global population and climate change also provide ample opportunities for investors to “capture the economic upside associated with these megatrends”, he added.
Within the digitisation and AI space, 53 per cent of investors said they will invest through a combination of both public and private markets, with meaningful progress in key industry segments expected to take place in about seven years.
The pace of digitisation has accelerated amid the Covid-19 pandemic, which has posed a myriad of challenges to the global economy and the continuity of businesses amid severe restrictions on mobility. About 65 per cent of the world's gross domestic product is set to be digitalised by 2022 and direct digital transformation investments are expected to reach $6.8 trillion between 2020 and 2023, according to the International Data Corporation estimates.
Direct investments in digital transformation will grow at a compound annual rate of 15.5 per cent globally between 2020 and 2023, according to the IDC report.
About two-thirds of investors said they expect the ageing population investment trend to remain important until at least 2050. It indicates that a funding gap exists today that offers a long-term investment opportunity.
“Healthcare and retirement services present the greatest opportunity” and investors expect meaningful opportunities to arise in that sector within the next decade, according to the Investcorp study.
Almost all investors expect climate change to significantly shape the global economy and investment trends over the next two decades, which is consistent with the global push to mitigate climate risks. More than 60 per cent of investors said they would invest in the impact of climate change through both public and private markets, as opposed to favouring one over the other.
“Half of all investors polled expect meaningful developments across several industry segments this decade. Over the short term, investors expect the greatest opportunities to be within the renewable energy and clean technology segments,” the report said.
Institutional investors also underscored the emerging dominance of China and the rising trend of investments in central bank digital currencies and cryptocurrencies as investment themes, with a significant portion of respondents seeing them as trends that are “here to stay and deserving of significant attention and capital allocation”.
Investments in electric vehicles and autonomous driving was listed by 62 per cent of respondents, personalised healthcare by 60 per cent, the growing dominance of China trend by 59 per cent and cryptocurrencies were underscored by 59 per cent of investors as investment themes.
Investment in urbanisation and smart cities were highlighted by 38 per cent of respondents, sustainability and the circular economy by 37 per cent, and opportunities surrounding the redefining of global trade were underlined by 26 per cent of global investors surveyed, according to the report.
The top-10 investment trends
- Automation, digitisation and AI (95%)
- Ageing population (69%)
- Impact of climate change (65%)
- Electric and autonomous vehicles (62%)
- Personalised healthcare (60%)
- Growing dominance of China (59%)
- Digital and cryptocurrencies (59%)
- Urbanisation and smart cities (38%)
- Sustainability and the circular economy (37%)
- Redefining global trade (26%)