From mega trends to investment themes

Everyone loves a good story. While most asset managers have historically centred their investments around specific asset classes or geographic regions, more investors today are looking for a greater emotional attachment with their portfolios. Thematic strategies that reflect a compelling narrative can help meet this demand and offer an attractive opportunity for active asset managers to show what they can deliver.

Investment Theme
Neil Dwane, Global Strategist, discusses how thematic investing aims to identify longer-term growth opportunities that stem from technological innovations or regulatory and structural changes, such as urbanisation, demographic and social change, and scarcity of resources.
Why thematic investing?
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Transparency
Themes are well-known, starting as topics of conversation among budget decision makers within companies and will later become visible in most people’s personal experience
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Growth
Powerful and secular shifts; triggered by innovation, regulation, socioeconomic factors; identify winning themes impacted by these shifts and allow investors to participate in them, no country or sector boundaries
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Performance
Selection of valid themes with good timing allows for higher alpha potential
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Megatrends
Urbanisation, Technological Innovation, Resource Scarcity, and Demographic & Social Change
From urbanisation to smart cities
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Population living in cities1-2
An increasing trend from
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An increasing trend from
0% 1800
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0% 1950
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0% 2018
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0% 2050
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0.0
Million people
are moving into cities per week3
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0
Mega
cities
had over 10 million
people each in 20154
By 2030, the number of
mega cities is
expected to reach
0
4
Cities are working smarter5
Driven by sensors, networks and engagement
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Smart
lighting
Intelligent and weather adaptive street lights boost energy efficiency
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Smart
building
Rooftop gardens to help with insulation, optimising utilities usage and ventilation
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Smart
transportation
Monitor vehicle and pedestrian levels to optimise traffic; autonomous vehicles
Smart cities: Growth story for investors
Economy
Cities are generating
Cities are
generating
0
%
of global GDP 6
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Financial
IoT in smart cities market worth
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$
0.0
Billion USD
by 20237
Civic and
environmental
Cities that run on information can reduce greenhouse gas emission by
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0
-
0
%
within 20 years8
From technological innovation to cybersecurity
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IoT
In the Internet of Things (IoT) age, over 20.4 billion devices will be connected by 20209.
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Unlock opportunities
The explosion of connectivity unlocks countless opportunities for cybercrime.
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Cybersecurity industry
The cybersecurity industry is quickly evolving to keep up with the growing number of cyber threats, creating a boom that investors can capitalise on.
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IoT
In the Internet of Things (IoT) age, over 20.4 billion devices will be connected by 20209.
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Unlock opportunities
The explosion of connectivity unlocks countless opportunities for cybercrime.
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Cybersecurity industry
The cybersecurity industry is quickly evolving to keep up with the growing number of cyber threats, creating a boom that investors can capitalise on.
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0
Million
6 million records lost/
stolen every day10
0
Billion
Over 10 billion records
have been lost or stolen
globally since 201310
0
Billion
Nearly 3 billion of these
were breached
in the first half of
2017 alone
10
0
Thousand
Close to 300,000 records/
stolen every hour10
0
Million
6 million records lost/
stolen every day10
0
Billion
Nearly 3 billion of these
were breached
in the first half of
2017 alone
10
0
Billion
Over 10 billion records
have been last or
stolen globally
since 201310
0
Thousand
Close to 300,000 records/
stolen every hour10
Tremendous financial impact from data breaches
$
0
Billion USD
Average losses after operating systems have been hacked can climb to $29 billion USD11.
$
0
Billion USD
A single large scale cyber-attack can trigger $53 billion USD in economic losses, comparable to damages caused by natural disasters11.
$
0
Trillion USD
By 2021, the cybercrime damages will cost $6 trillion USD every year globally12
Economic outlook
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Businesses are more focused than ever on protecting their data from increasingly complex threats.
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$1 trillion - Between 2017 and 2021, the predicted global spending on cybersecurity products and services will exceed $1 trillion USD13
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3.5 million unfilled cybersecurity jobs will be generated by 202113
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Cybersecurity companies are continually innovating to remain competitive, focusing on mobile security, cloud security, threat intelligence and security analytics
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Businesses are more focused than ever on protecting their data from increasingly complex threats.
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$1 trillion - Between 2017 and 2021, the predicted global spending on cybersecurity products and services will exceed $1 trillion USD13
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3.5 million unfilled cybersecurity jobs will be generated by 202113
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Cybersecurity companies are continually innovating to remain competitive, focusing on mobile security, cloud security, threat intelligence and security analytics
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Cybersecurity: Significant potential for investors
$
0
Billion USD
Global cybersecurity market value is $120 billion USD in 201914
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$
0
Billion USD
By 2024, the market value is expected to increase to $300 billion USD14
Why AllianzGI for thematic investing
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AllianzGI offers a selection of strategies that invests in companies expected to benefit from change, innovation and disruption.
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Broad
Investment
Solution
Currently managing ~USD 10 billion in thematic strategies, available in different vehicles and markets
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Thematica
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Artificial intelligence
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Cybersecurity
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Global biotech
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Health sciences
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Climate transition
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thematic
offering
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Natural resources
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Global agricultural trends
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Global water
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Demographics
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EM consumer
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Pet economy
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A well-chosen theme will perform
A well-chosen and well-timed theme with investment discipline and fundamentals will likely perform across cycle. Let’s look at Water for example.
Topics for shorter-term with active allocation
We have strong investment discipline to avoid the inevitable mean reversion, while topics follow a volatile development path.
Investment hype cycle
Be part of the story
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Clean water infrastructure
Water efficiency
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Water
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Food
security
Agriculture tech
Online consumer
Digital finance
Digital advertising
E-education
E-sports
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Digital
life
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Future
factory
Automation
3D printing
Internet of things
Robotics
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Smart
cities
Recycling
Electric vehicles
Autonomous driving
Sharing economy
Clean water infrastructure
Water efficiency
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Water
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Food
security
Agriculture tech
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Future
factory
Automation
3D printing
Internet of things
Robotics
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Digital
life
Online consumer
Digital finance
Digital advertising
E-education
E-sports
Recycling
Electric vehicles
Autonomous driving
Sharing economy
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Smart
cities

Source:

1.
United Nations; ”Urban Millennium”;2001
2.
United Nations; ”World Urbanisation Prospects – The 2018 Revision”;2018
3.
PwC; “A New Urban Agenda: Accommodating 2 billion new urban citizens”;2014
4.
Allianz Risk Pulse; “The megacity state: The world’s biggest cities shaping our future”; 2015
5.
HKSAR; “Hong Kong Smart City Blueprint”; 2017
6.
Worldbank; “Urban Development”; 2019
7.
Markets and Markets; “IoT in Smart Cities Market worth $219.6 billion by 2023”; 2018
8.
Mckinsey & Company; “Smart Cities: Digital Solutions for a more livable future ”; 2018
9.
Gartner; “Gartner Says 8.4 Billion Connected "Things" Will Be in Use in 2017, Up 31 Percent From 2016”; 2017
10.
Gemalto; “Data Breach Statistics”; 2018
11.
Lloyds; “Extreme cyber-attack could cost as much as Superstorm Sandy”; 2017
12.
Herjavec Group; “The 2019 Official Annual Cybercrime Report”; 2019
13.
Cisco and Cybersecurity Ventures; “2019 Cybersecurity Almanac: 100 Facts, Figures, Predictions and Statistics”; 2019
14.
Security Sales & Integration; “Global Cybersecurity Market to Eclipse $300B by 2024”; 2019
15.
Morningstar Direct; Mar 2019
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