Below is an analysis Paulo Pashita (pictured), Head of State of Italia di Pictet Asset Management
Long before Covid-19, demographic changes and technological advances began a process of radical transformation in our lives. We form families later, live longer and have to take care of the elderly. The traditional school-work-retirement lifestyle enjoyed by previous generations has evolved into something more complex and dynamic, driven by Also from new needs. The emergence of the epidemic has also exacerbated some trends: work is more transitional and often takes place from home, and education is moving from the classroom to the Internet. Therefore, the importance of the services that support the learning we need for ever-evolving professions, helping our families and ourselves, and the daily chores we try to outsource to free up the most valuable assets, time, and services that help us enjoy them.
So the epidemic has entered into an already rapidly evolving context: one of the most devastating effects it has brought with it has been the rediscovery of man and his most special needs. We live in a complicated period from many perspectives, but one of the deepest wounds concerns the distance people have had to keep with the rest of the world, starting with the most important feelings. Hence there is a strong desire for the salvation of all mankind, along with the need to reset the world’s approach to mankind.
In terms of investment, in an era characterized by the spread of shorthand ESG (environmentalAnd the socialAnd the JudgmentThis means the need to allocate more space for the social aspects, which have been partially neglected until now in order to focus on protecting the environment. In this area there is a whole world of investment topics that I currently split Pictet AM into Three main branches: The growth in demand for education, the sphere related to the needs of the family and the care of loved ones and the strong demand for entertainment and experiences that will explode when restrictions are finally lifted. Individual focused service companies represent a robust and diversified investment opportunity that focuses on everyday social needs. They have the power to provide returns, but also to improve the well-being of societies by helping individuals lead more fulfilling lives. The goal is increasingly to transcend tangible goods toward what is truly satisfying: one’s self-awareness.
The human is at the forefront
The crisis we are experiencing has brought a series of negative consequences and new social needs that must be met. The Global Risks Report 2021 From the World Economic Forum (Global Risks Report 2021 | World Economic Forum – weforum.org), within its map of global risks, the erosion of social cohesion between long-term issues, which, with high probability, you should be reckoned with. Certain dissatisfaction is increasingly prevalent, exacerbated by a pandemic that has also led to loneliness, compromise and, for some, loss of a job (or fear of losing it). According to the report, in fact, “In the second quarter of 2020 alone, 495 million jobs were lost“, Which “It will instantly increase inequality, but it will also lead to an unequal recoveryAll the reasons that alone will be sufficient to divert attention to needs that have not been addressed. As we have said, the emergency highlighted the topic of self-realization: the man who, despite the difficulties, or in fact in response to them, seeks salvation after being tested by the epidemic. Also the man who goes in search of experiences, cultural entertainment, travel and, in general, all that can be helpful to mitigate the negative effects of forced imprisonment.
The semi-undiscovered area of the social factor
Pictet AM believes that in terms of the source of investments related to the social sphere, there will be two big trends destined to grow significantly in the near future. On the one hand, all issues related to social services such as education, vocational training, helping the elderly and managing the growing social distress, and on the other hand, Experience economy, Where experience-related purchases (money spent) are preferred over physical purchases (money spent) because they provide greater happiness. Interest in the social field has also grown along with the adoption of environmental, social and institutional governance standards. It is no coincidence that Europe’s sustainable funds are expanding so much that Morningstar measures its net worth at € 1.1 trillion, up 51.8% year-on-year (while the entire industry grew only 3%). Inflows in the year reached 233 billion, a number that has increased tenfold in the past five years, and the share of total European fundraising grew to 45% in the fourth quarter of the year.
However, it is singular that ESG funds currently available (over 3,200) focus mostly on environmental issues. However, the social aspect underlies the investment opportunities that should not be overlooked, because there is already evidence that investing in this factor results in economic and financial value. According to the nonprofit research firm Just Capital, for example, US companies with a strong positive social impact since November 2016 have outperformed their negative counterparts by nearly 30%.
Educational technology boom
One of the main investment lines that Pictet AM has focused on relates to its interest in education (online and living, primary and work) and career. According to UNESCO, 1.4 billion students were affected by school closures around the world in the year of the pandemic and interest in distance learning, measured by Google Trends, quadrupled in the spring of 2020. In this case, too, the pandemic has only accelerated the trend that was underway. Indeed: the technology applied to education, in fact, in addition to providing greater personalization of content through digital platforms equipped with artificial intelligence, has the social benefit of providing access to learning and information to larger sections of the population than ever before at lower costs. Therefore, the estimates of a global education market worth $ 10 trillion by 2030, with annual growth of 4.5% and equal to 6% of global GDP, are not surprising (source: HolonIQ, Education 2030; EdtechX Report) .
But there’s more, because training use times will also change, and they are no longer focused in the early part of life. According to the World Economic Forum, in fact, 65% of children who start primary school in 2018 will have a profession that does not yet exist: this means that training must be adapted by providing new and different skills, not limited to school. Period, but by extending its width to all stages of life.
EdTech will grow 15% annually to reach $ 368 billion in 2025 (Source: EdtechX, IBIS Capital Cairneagle Associates). In this sector, Chinese is a good example of a company that has been able to combine traditional offline teaching forms with online forms Education and New Eastern Technology. It is the largest Chinese private teaching service provider with 1,416 centers and 38,400 teachers in 86 cities. During the closing months, he combined online and face-to-face teaching, and had an important competitive advantage. The company’s focus on innovation is also evident due to the fact that online tutoring services rely on artificial intelligence software and self-adapting teaching systems, which are able to fine-tune the content provided based on feedback from students. The company is also actively involved in the social spheres: to promote equality and education in poor areas of China, it builds schools in these areas and provides free access to its online courses.
Promote family life
Another big streak of investment that has emerged has to do with family life and caring for others. Suffice it to say that in the United States, 60% of people live in households where parents work full time and have at least one child and an elderly relative to care for them at the same time. Moreover, 65% of women with children work under the age of six. For this reason, people often have to rely on outside services to care for children and the elderly. The lockdown also caused more loneliness and an increase in the associated mental health problems. In this overall picture, nursing home services are on the rise, pets care – Google Trend reports nearly 30% increase in pet interest – fertility care and meeting platforms that make it easy to find a partner.
Among the companies operating in sectors with high potential, they also fall within them Bright prospects, A leading home health and aged care services company in the United States. A company helps respond to the challenge posed by the fact that by 2050 in Europe and the United States, we will have five seniors for every 10 working adults, compared to three today. Not only that, Bright Horizons also provides childcare-related services and operates 1,084 primary education centers near the workplace: Daycare centers in the workplace perform an important social function, supporting organizations in solving childcare challenges, promoting well-being in place. Work, help women achieve leadership positions and make it easier for employers and employees to ultimately achieve their goals.
Another large investment area looking beyond Covid. The end of restrictions and restrictions will revive the demand for entertainment through travel, food and drink, and cultural experiences. In fact, in the United States and Europe, spending on leisure and cultural services, which is part ofExperience economy, It has grown more than twice the growth of GDP in the past 20 years. This is a very broad and diverse sector, which also includes activities that have transformed into digital platforms in recent years. For example, Walt Disney, Has grown into a 360-degree entertainment company, with multimedia networks, theme park experiences, movie studios, and live and online entertainment. Through closures imposed by social distancing measures, it has demonstrated exceptional resilience, capitalizing on its revenue to produce and stream content across the digital platforms Hulu and Disney +.
The Pictet-Human Investment Fund strategy at Pictet AM is based on all these pillars, launched in Italy at the start of the year, and created to ride a trend linked to the social cause, and is clearly underrepresented in the market. The portfolio has already managed to have a positive social impact. This is particularly the case in the world of education and health, as measured by exposure to United Nations Sustainable Development Goals 3 and 4, which are related respectively to “health and well-being” and “quality education”. The pillars of the investment world are those sectors that can represent the roots of change in our society, and that lead the fund to invest in underrepresented stocks, but with enormous potential. It is the first fund that pays comprehensive attention to the human being: from the career path to education, from training to family life, and even touching on social life. With all due respect to the heliocentric system, man becomes once again the center of the world.