New era of innovation drives thematic tilts

The acceleration of various trends amid Covid-19 enables investors to exploit tech-led progress within certain areas of healthcare, manufacturing and lifestyle, among other sectors, says Schroders.

Among the few positive impacts of the pandemic has been a wave of innovation to address global imbalances that is translating into enticing investment opportunities.

These are emerging within specific pockets of the healthcare, smart manufacturing, e-commerce, wellbeing and lifestyle sectors.

“At the core of thematic investing at Schroders is the belief that the most powerful and persistent investment themes are those where human ingenuity ignites innovation,” said David Docherty, investment director, thematics, at the firm.

Incentives for healthcare innovation

Based on the rapid development of vaccines for Covid-19, there is good reason to expect science and technology to be crucial as companies harness data, computing power and medical knowledge to deliver new solutions.

“We believe this will drive further breakthroughs in advanced therapies, medical technology and healthcare services, as well as in digital healthcare where technology in the form of ‘telehealth’ has shown its worth during this crisis,” Docherty said.

Furthermore, realisation among governments about their vulnerability to pandemics will likely drive higher levels of spending on healthcare in the future, he added.

Smart ways to meet demand

From the perspective of global manufacturing, meanwhile, there is greater awareness about the need to innovate to fill potential supply-and-demand gaps.

This will be seen through companies developing local supply lines. At the same time, Docherty said they will need to invest in data analytics to understand and manage volatile demand and disrupted procurement in the future.

He also expects to see investment in other advanced manufacturing themes. These include: 3D printing; automation in the shape of robotics, sensors and controls; and advanced materials like lightweight composites as companies harness innovations in hardware, software and materials to deliver greater agility.

Catering to new lifestyle needs

With consumers now more comfortable than ever with online shopping, Docherty believes the growing usage of e-commerce platforms for everyday purchase like groceries indicates an appetite to sign-up to many other apps going forward.

“Similarly, the focus on wellbeing will only intensify,” he added, “as consumers are prompted to take their underlying health more seriously by committing time and money to exercise.”

Further, as former lifestyle norms return, the desire for experiences through tourism and live events will quickly resume in a post-pandemic world.

Delivering on disruption

At the same time, with newer habits such as working from home likely to continue for many people globally, companies that facilitate this, such as software enablers, will see a boost to their longer-term growth prospects.

The same can be said for other products and services that have flourished during lockdowns, such as interactive video platforms as people socialise online.

“Across the board, a powerful convergence of ingenious technologies such as artificial intelligence, quantum computing and the internet of things will drive disruptive innovations in fintech, communications and numerous other industries during this crisis and long after it has passed,” said Docherty.