Date
12 December 2017
Automation and robotics have caused employment in US manufacturing to continually slide since 2000 even though production has apparently increased.
Automation and robotics have caused employment in US manufacturing to continually slide since 2000 even though production has apparently increased.

Megatrends: An index approach to thematic investing

Megatrends are global economic, social and demographical shifts that can have a major influence on our everyday lives. BlackRock, based on research conducted by leading consulting firms, has established a list of five major megatrends. We believe these are likely to shape our global economic, political and social landscape in the years to come. One such trend is the investment opportunities brought by automation and robotics.

These themes have the potential to affect all of our personal lives and influence the outcome of our investment decision. We believe that the use of megatrends in investment processes offers real investment opportunities and the potential for attractive risk and return profiles.
The five major megatrends we see shaping our global economic, political and social landscape in the coming years are: 

1) The growing economic strength of emerging economies which is changing the balance of power globally;

2) An expanding global population which leads to higher carbon emissions and a more volatile world climate and puts pressure on finite global resources;

3) Demographics and social change;

4) Technological breakthrough;

5) Rapid urbanization.

The growing economic strength of emerging economies, such as China and India, is changing the balance of power in the global economy. At the same time, we are in the midst of a technological revolution that is having a profound impact on the global economy, the extent of which is yet to be truly understood. We believe there are a number of investment themes that emerge at the intersection of the five megatrends that we have outlined.

Investors can now access this theme through advances in indexing – where index providers are able to analyze companies by how they generate revenues, enabling individual investors to access investment themes that have previously been available only to institutional investors.

Automation and robotics

Robotics are transforming the workforce. Our view of the Automation & Robotics theme captures companies that are innovating in this area. The theme focuses on a range of specific technological areas including nanotechnology, manufacturing robotics and wearable technology.

Automation and robotics have gradually found widespread applications in the manufacturing sector, causing the employment in U.S. manufacturing to continually slide since year 2000 even though production has apparently increased – reflecting the fact that automation and robotics have completely disrupted the labour market.

Exposure to different markets and sectors

While stocks, bonds, commodities and real estate have been around for centuries, index funds have revolutionized how investors access these assets and build portfolios to seek outcomes that matter most to them. ETFs give efficient access; there’s an index and an index fund for almost every market and investment strategy you can think of. More choice gives investors a lot of flexibility to build for the goals they want.

When you combine the impact of lower fees and tax efficiency, the potential savings gained by using an index fund can really add up. Index ETFs and mutual funds cost about a third as much as typical active mutual funds.

One of the important things to look for is the quality of disclosure by the ETF provider – investors should be able to see what they own and how it is performing in a clear, easily accessible manner that adheres to international standards of performance benchmarking.

– Contact us at [email protected]

RT/RA

Head of iShares and Index Investing Asia Pacific

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