Sustainable funds, robotics and Chinese consumer based investments are set to be among the winning sectors in a post-Covid world, according to Quilter investors.
Paul Craig, portfolio manager at the firm, predicted businesses would go through a period of “intense competition” as a result of the economic fallout of the coronavirus crisis and warned it would be a case of “survival of the fittest” in the new environment.
He added: “The coronavirus has had a profound impact on the way we live and work. We very much expect these changes to become permanent and businesses are going to have to keep up.”
According to Mr Craig, sustainability, automation and China were among the sectors set to be “winners” from the shift in consumer and business behaviour.
Sustainability
Environmental, social and governance investing has boomed in popularity in recent years as fears over climate change have led more investors to consider the impact of their investments.
Mr Craig said this trend had been exacerbated by the crisis, which had put a “renewed emphasis on the actions and impact of corporates”.
He said: “While attention used to be primarily devoted to environmental considerations, many investors are now focusing on the behaviour of corporates during the crisis, and in turn their societal impact.
“This drive to ESG investment will result in those companies already committing themselves to progressive policies doing well out of the pandemic, and will cause the others to sit up and take notice.”
Morningstar’s latest report showed assets held in ESG funds worldwide hit a record £810tn in June as investors pumped £54bn into sustainable products in Q2 alone.
Darius McDermott, managing director at FundCalibre agreed, adding that sustainable investing had been “very strong” in the last five years and was “going to continue”.
Although present before the crisis began, Adrian Lowcock, head of personal investing at Willis Owen, agreed the pandemic had accelerated the rise of sustainable investing.
Automation
Mr Craig said the coronavirus crisis had shifted the use of robotics and automation from “just a big technology company play” to a “bigger opportunity within factories and manufacturing”.
Quilter expects to see an acceleration and evolution of the trend as automation is brought in to help combat the virus.
“Businesses are being forced to introduce social distancing on the production line, which means less staff, while many have had to make staff redundant to keep costs under control.
“This means further automation of tasks will be required to pick up the slack and none of it is likely to be reversed once normality is restored.
Data from the International Federation of Robotics shows the world supply of industrial robot has jumped from about 80 in 2009 to more than 400 in 2020. The total is expected to reach 600 by 2024.
Ben Yearsley, investment consultant at Fairview Investing, agreed the robotics trend had been accelerated by Covid.
But Mr Lowcock said it was unlikely the best performers from the crisis were going to be pinned to “just one sector or theme” but more likely across multiple areas, determined by a company’s management.
Chinese consumer
While the coronavirus may have started in China and impacted the country to a large extent, Mr Craig said it was the first to “emerge” and “take advantage of the pent-up consumer demand”.
He said: “The growth of the middle class in China continues and shows no sign of abating as its economy continues to dwarf those of many former powerhouses.”
According to the China National Bureau of Statistics, China’s household consumption has rocketed from just under £1.5tn in 2010 to £4.2tn in 2020.
Mr McDermott said: “China consumer is very much a well-versed theme and a large part of the thesis for emerging markets generally.”
Mr Yearsley agreed, adding it was the “biggest consumer market in the world”.
imogen.tew@ft.com
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