One of the biggest challenges facing investors in the near future is the ever-increasing pace of change, says Newton CIO Curt Custard. Speaking at the BNY Mellon Global Investment Conference in March, he described a world where companies are being disrupted and displaced at a startling rate.
Even our consumer choices are rapidly changing – while television took around 40 years from its invention to become a fixture in American households; the internet took just nine years to become ubiquitous, he noted. Mobile gaming app Angry Birds took just weeks to reach smartphone saturation point.
Change at the global level is reflected in the investment world too. The high rate of technological innovation means traditional sector definitions are beginning to break down, according to Custard. “Technology used to be a sector in its own right,” he said. “Now it’s everything.”
For investors, this means a paradigm shift. While fund managers once sought ‘reliability’ and ‘stability’ for companies in the context of long-term investing, today the focus is as much on ‘economic moats’ and businesses’ ability to swiftly pivot to new models. This means evaluating equities through the lens of industrial sectors has become old hat, said Custard, as managers look to novel ways of assessing value.
This era of fast-moving change finds its keenest expression in emerging markets. Custard noted, for example, how e-sports is now the fastest growing sport in the world – helped largely by the rise in audience numbers and gamers in Asia. But he also described how one consumer goods company recently reported more profit growth in individual emerging market countries such as Pakistan or Myanmar than in the entire European Union.
Climate change is another area of massive transformation. Custard highlighted insurance as one industry sector already deeply affected – but he also noted how companies are now having to factor in such issues when deciding where to build their facilities. “The amount that needs to be invested to counter climate change is enormous,” he said. “As fund managers, we need to find the companies that are on the right side of that equation.”