Digital transformation generates investment opportunities
Three enduring trends (population growth, urbanization and aging) on the background of technological advancement, resource scarcity and societal changes inter playing with digital transformation are fundamentally changing the way we live and work.
Thanks to 5G technology, Blockchain, Internet of Things (IoT), Artifi cial Intelligence (AI) and other disruptive technologies, jobs, mobility concepts, housing, health care and fi nancial services will be rethought.
From these developments 6 investment themes can be derived, which open up new investment opportunities. Please have a look at the investment themes below to find out what opportunities investing in digitization offers to investors.
Attractive long-term investment themes
Driven by a desire to stay connected at all times and the need to efficiently multitask throughout a busy day, an unprecedented amount of data is produced. Favorable demographics and other secular trends like the Internet of Things (IoT) are fueling this growth.
Artificial intelligence (AI), augmented reality (AR)/ virtual reality (VR), big data, cloud computing and 5G are set to transform many industries. Over the next decade, spending on their underlying enabling technologies that allow their development and production should remain high as both disrupting and incumbent companies continue to invest.
Consumer behavior is changing, with consumers increasingly purchasing their goods online. Greater smartphone penetration has further dissolved the boundaries of time and place as consumers can buy products whenever and wherever they want.
Security and safety
Security and safety touch lives everywhere. The global security and safety market benefits not only from structural trends such as rising cyberattacks, but also from governments' need to keep infrastructure safe and functioning. Enterprises must protect data and consumers have to trust products like baby food.
Healthcare is one of the least digitised sectors, but is poised for rapid change. Digitization can improve efficiency by reducing waste and fraud, prioritising the most effective interventions and saving time in the drug development process.
Driven by rapid urbanization, strong demand from millennials and favorable regulations, the global fintech industry is at an inflection point and is set to drive a major digital transformation in the financial services industry.
The irresistible forces of digitization
Concentrating on a small number of key themes while at the same time looking for a good degree of diversification is the UBS approach to this big investment trend. Read more in this article by our portfolio manager Albert Tsuei.
Opportunities and risks
- Ride the digital revolution: To benefit from the disruptive innovations that are transforming the world
- Exposure to multiple themes: Provides diversified exposure across several clearly identified themes which benefit from the innovative and disruptive forces of digital transformation
- Focus on high quality stocks: Picking stocks based on fundamental company research
- Diversification of investment exposure by company type: Investing in early stage companies with high growth potential, mature companies embracing digital transformation and enabler companies providing the underlying technologies for this transformation
- The fund invests in equities and may therefore be subject to high fluctuations in value. For this reason, an investment horizon of at least five years is required
- Focusing intentionally on stocks within certain themes may come with further risks
- Equity fund with core allocation to digital transformation, mainly IT sector related theme stocks with higher volatility than global equities
- The fund uses leverage techniques which entail additional risks
- The use of derivatives may result in additional risks, particularly counterparty risk
- Every fund has specific risks, which can significantly increase under unusual market conditions