A Glimpse of the Future Megatrends – How to make money from them

Investors rejoice: the world is facing three global challenges – catch on now and you could soon benefit.

by Marc Lustenberger 11 Nov 2016

In China alone, there are 15 megacities – in which more than 260 million people live. And their number is rising all the time. Photo: iStock

In the film “Forrest Gump,” Tom Hank’s character unwittingly finds himself invested in “some kind of fruit company”. Thanks to his partner Lieutenant Dan, he becomes an Apple shareholder. If anyone had actually invested 100,000 dollars in the computer firm back in 1978 and held onto their shares after the IPO in 1980, they would now be rich – very rich. Their investment would have grown to just under 10 billion dollars today. Sadly, success stories of this kind are more likely to be found in the movies than in real life. Nevertheless, it’s worth keeping your eyes open and investing in companies that operate in tomorrow’s markets. Population growth, urbanization and an aging demographic are long-term trends that will have a huge impact on global development in the coming decades, thereby opening up good investment opportunities. What lies behind the individual megatrends?

1. Population growth – No end in sight

World population is growing incessantly. It is expected to rise from 7.3 billion today to just under 10 billion by 2050. While population numbers in the developed world are increasing only slightly, growth remains high in low- and middle-income countries, posing numerous challenges for the global economy and global community. We have to make sure we can feed all these people. This will require additional resources such as energy, water and commodities. All of which will have to be managed sustainably. In addition, access to healthcare and education will have to be improved. But these factors will also create new business opportunities. Because a growing population means potential clients. In combination with higher incomes, this creates huge additional market potential for companies operating in the fields of security, protection, agriculture and infrastructure. Especially those in emerging markets.

2. Urbanization – Megatrend as opportunity

The world is becoming increasingly urban. At the same time, rural flight is a continuing trend. By 2030, some 60 percent of the world population will live in cities. However, this trend also appears to be causing population densities to increase. In 15 years’ time, around 9% of the world’s population will live in 41 megacities with more than 10 million inhabitants each. As economic hubs and centers of culture and creativity, these urban agglomerations hold a certain attraction. However, their sheer size presents urban planners, architects, economists and politicians with enormous challenges. Complex development projects are required, along with gigantic investments in traffic, infrastructure and supply and disposal channels in these super-sized cities, new and old, opening up great opportunities for companies in the water supply, rapid transit and waste management sectors.

3. Aging – Elderly stay young

The global population is growing older. There will be more people aged 60+ than under 25 in developed countries by 2030. Without immigration, the population in countries like Switzerland and Germany would actually shrink in the next few years. Demographic change will have a noticeable impact on every society in the world. Because there are fewer young people, older generations are remaining in the workforce for longer. These senior citizens are active and have more money available to spend. They look after their health and, even in later life, remain eager to learn and try out new things. They set up businesses, get involved in culture and travel the globe. In economic terms, this megatrend offers interesting long-term investment themes such as retirement homes, retirement planning, the fight against cancer (oncology), travel and wellness.

The easy way to back megatrends

The megatrends can already be clearly identified today. You can benefit from them by backing the right companies. Investing through investment funds can help cut your risk and make sure you don’t bet on the “wrong horse”. The UBS Long Term Themes Equity Fund, for example, is a convenient way of participating in megatrends. The fund offers access to companies that are already providing solutions for the challenges of tomorrow and are therefore likely to be among the future winners. It focuses on the three megatrends of population growth, urbanization and aging. It invests in 14 investment themes worldwide and in 40 to 80 stocks, diversified by themes, countries and sectors. As the fund invests in equities it may be subject to fluctuations in value. For this reason, an investment horizon of at least five years is required by anyone wishing to invest in the fund.