This article was written by expert contributor, Portfolio Manager Dania Zinurova from WAM Alternative Assets (ASX: WMA).
What is a megatrend?
Megatrends are defined as macroeconomic changes we are seeing on a global scale that are transforming economies, businesses and societies. WAM Alternative Assets focuses on four key megatrends including: digitalisation, demographical shifts and ageing populations, climate change and the increasing demand for food.
Digitalisation
First in the series is digitalisation, a trend impossible to ignore, as it is advancing at a high speed and affects all aspects of our lives. It is a broad trend that extends to artificial intelligence, automation, financial and bio technology, cyber security and more. This trend translates very well into investment strategies in infrastructure. As with any broad asset valuation assessment, it is critical to understand the full investment universe rather than just those offering easy access and scale. In the video Dania explores the undiscovered investment opportunities across this space.
Demographical Shifts and Ageing Populations
Demographical shifts are ever present in our society. Economists and governments have voiced concerns that the ageing population could put unsustainable pressure on public spending, in addition to rising health care costs and the ability of the health system to facilitate increased demand. When we look at this from an investment perspective, we see healthcare real estate presenting an attractive opportunity set with strong tailwinds, demographical and economic trends, and demand outweighing supply. This has seen the sector experience strong capital inflows and its share of the securitised property market steadily rise.
Conversely, more traditional asset classes within real estate such as office buildings and retail are experiencing structural shifts. Changes in consumer habits including online retail and new ways of working have been accelerated by coronavirus leading to traditional asset classes facing strong head winds. In this video, Dania discusses the strong characteristics of this megatrend and the investment opportunities it represents.
Climate Change
Climate change impacts all aspects of our lives contributing to heat stress, water stress, extreme rainfall, rising sea levels and the rise of acute environmental weather events, such as hurricanes and typhoons. Carbon emissions are also affecting the planet significantly, with greenhouse gases contributing to the highest levels of emissions in the atmosphere. Dania discusses what climate change means for investors and how this megatrend can be accessed by nearly all avenues of our alternative assets portfolio, including infrastructure, private equity, venture capital, real estate, real assets and even asset classes like private debt.
Increasing Demand for Food
According to the Food and Agricultural Organisation, each day around 200,000 babies are born around the world, which means there are roughly 70 million more people each year that the agricultural sector needs to feed. The United Nations projects the global population will grow from 7.5 billion to around 8 billion by 2023, and 9.7 billion by 2050. This significant growth is being driven by developing countries. By 2050, the six largest countries by population are expected to be China, India, Indonesia, Nigeria, Pakistan and the US, which means global agricultural output will need to increase by 70% to meet projected demand from rising populations. As investors we look at sectors like agriculture, water rights, food manufacture and processing and other related sectors to access this megatrend. Dania discusses WAM Alternative Assets’ exposure to this asset class, a sector that contributes approximately 3% to Australia’s gross domestic product.
Investing in alternative assets has traditionally been limited to these institutional investors, as well as high net worth individuals, due to the large minimum ticket sizes required for a single investment (often $10 million). WAM Alternative Assets (ASX: WMA) however, seeks to democratise investing in alternative assets for retail investors through its listed investment company (LIC) structure, which provides investors with access to a diversified portfolio of alternative assets while also providing them liquidity and a steady stream of dividends.
Prior to making an investment decision, retail investors should seek advice from their financial adviser. This document is intended as general information only.