Megatrends in the context of your portfolio

In contrast to a hype or a crash, Megatrends do not come about because the markets happen to be in a particular “mood”. That is why the Megatrends of 2020 will be the same as the Megatrends of 2021, and 2030, and so on into the future – because Megatrends are currents that have to meet three conditions.

Find out more about Megatrend Investing and the Megatrends Model that Vontobel uses.

  

Megatrends bring the big picture into sharper focus

For around ten years now, changes have been emerging that are permanently affecting all of our lives. These are the so-called “Megatrends”. What they have in common:

  • They remain relevant for 25 to 30 years.
  • They have an impact on every area of our lives.
  • They trigger global shifts.

  

 

The four Megatrends on the Megatrends Map

  

 

Do you have specific questions about Megatrends or Megatrend Investing?

Go to the FAQ collection

  

“Megatrends are like continental plates: moving without cease, and independent of any particular event.”

  

  

 

Current issue: Megatrends in the Coronavirus age

  

Symbolbild für Megatrends zu Corona-Zeiten: Menschen stehen in kleinen Gruppen und mit grossem Abstand zueinander. Linien illustrieren das Contact-Tracing

The Coronavirus pandemic was an unexpected catalyst for Megatrend models. It has not only shown that the model remains of interest for investors. On the contrary, COVID-19 has confirmed the Megatrends in terms of their relevance and robustness.

Discover four areas where the Megatrends have been confirmed.

 
  • The digitization of everyday life during the pandemic (technological change)
    The Coronavirus and the Megatrend “Technological change”

    The effects of accelerated technological change were particularly felt in the new work-from-home boom. Hardly a single news portal failed to offer “tips for working efficiently at home” or to report on the joys of the virtual after-work drink with colleagues. But outside of the world of work, too, the pandemic accelerated the process of digitization in diverse areas of our lives, from video phone calls to online shopping to food delivery.

    At least as significant as these changes, however, was the way Big Data and artificial intelligence (AI) became the backbone of pandemic control. With contact tracing apps, the world experienced an unprecedented degree of connectivity. Smartphone manufacturers updated their devices practically overnight in order to exploit the possibilities of Bluetooth technology. And the World Health Organization (WHO) set up a digital platform (C-TAP) in May 2020 that bundled research results for treatment and diagnostics.

  • New investments in energy and climate protection
    The Coronavirus and the Megatrend “Sustainable value creation”

    At a stroke, the world's aircraft fleets were in effect grounded in the spring of 2020. At the same time, we experienced a never-before-seen return to a more local focus – in our private lives as well. Thanks to empty supermarket shelves, the issue of local food sources took on a new urgency, as did the need for more sustainable supply chains. While politicians were putting together the first rescue packages at record speed, there were calls that these funds should (also) be used for the sustainable transformation of the economy. 

    Planned energy and climate investments are, in a word, “considerable”. Around the world, around 18 trillion dollars are being made available, divided between:

    • the “Green New Deal” (USA, 2 trillion),
    • the “European Green Deal” (1 trillion)
    • and China's Climate Neutrality Plan (15 trillion by 2060).
  • Power poker vs. multinational cooperation
    The Coronavirus and the Megatrend “Multipolar world”

    COVID-19 has shown the world how fragile the current geopolitical balance of power is. In the power poker played by the world powers, the pendulum swung from a euphoric “we’re all in this together” attitude to one of resolute opposition – and back again. On the one hand, governments made it possible for their research institutions to collaborate across borders in vaccine development on an unprecedented scale; on the other hand, they outdid each other with accusations relating to the origin of the pandemic and, most recently, the distribution of vaccines.

  • Metropolitan areas vs. social distancing
    The Coronavirus and the Megatrend “Demographics and urbanization”

    The calls for “social distancing” made us realize how densely populated the cities are that we live in and how vulnerable our aging society is – a fact that even before the pandemic could hardly be hidden any longer, but was now out in the open for all to see.

    As hubs of human interaction, large cities were hit hard by the effects of COVID-19. In the wake of the uncertainties this created, the need to transform these urban concentrations to smart cities has become clearer than ever. Networked healthcare will also play a role here, as will new urban mobility concepts.

 

  

 

We study Megatrends to create investment guidance:

“Defining investment themes to navigate through a world of transformation.”
 

  

  

Megatrends reduce complexity

Whether it’s “beyond meat”, robotics, or wind energy, the crux is always the same. You pick up an investment topic in the media that is currently making headlines. But how does this supposed investment opportunity or share fit into your overall portfolio? An example:

  

Smart Farming as an investment theme: A drone hovers over a planted green field. The drone is being controlled by a farmer who is standing in the field with a smartphone.

“Smart Farming” as an investment theme

At first glance, the focus here is on equities in the agricultural technology sector. But indoor farming, vertical farming and food tech in general can also be exciting for investors. How do they interact? How are they shaping the future of food?

Blog article on this subject

Related investment ideas

  • Show more examples
    Water as an investment theme: A faucet carelessly left running illustrates mankind’s increasing consumption of water

    “Aqua” as an investment theme

    Mankind’s water consumption is increasing inexorably. But how much water is actually of drinking quality? Innovative solutions are more in demand than ever to tap, treat, secure, and purify water.

    Blog article on this subject

    Related investment ideas

      

    Robotics as an investment theme, illustrated by a “fist bump” greeting between a human hand and a robotic hand

    “Robotics” as an investment theme

    Companies from many different sectors are pondering investments in robotics and automation technology. For quite some time already, the focus has moved beyond traditional industrial production and supply chain segments; automation has also begun in the service sector, whether it is by exploiting Big Data or via AI (Artificial Intelligence).

    Blog article on this subject

    Related investment ideas

      

    Strong brands as an investment theme: A shopping street with large illuminated advertising illustrates the importance of strong brands in everyday consumer life.

    “NextGen brands” as an investment theme

    Brands can influence consumers’ purchasing decisions. This applies to the brand-loving Millennial generation – and even more so to Generation Z, who became familiar with brands as catalysts for a new sense of togetherness. “NextGen Brands” have even managed to elevate drinks, snacks and gadgets such as smartphones to “cult” items – or to be more precise: to “culture” itself.

    Blog article on this subject

    Related investment ideas

      

    Disruption as an investment theme: The view from above of several lines of yellow taxis in a rush-hour traffic jam symbolizes the mainstream from which opportunities for disruption arise.

    “Disruptors” as an investment theme

    What so-called disruptors have in common is that they respond successfully to changing consumer demands. With a technological lead and new service offerings, such innovative companies create new markets and target groups.

    Blog article on this subject

    Related investment ideas

      

    E-sports as an investment theme: A white and a black video game controller face each other, opponents ready to attack .

    “E-sports” as an investment theme

    The movie and music businesses are no longer the alpha and omega in the entertainment industry. Today, e-sports and video gaming are setting the direction the industry is headed in. The economic potential around this new branch of the entertainment industry is huge, as soon smartphones become potential gaming devices, meaning that 4 billion people will be carrying one around in their pockets.

    Blog article on this subject

    Related investment ideas

      

 

  

 

Focusing on opportunities in the right place

Having an understanding of, and a “feel” for, a stock market is essential if you want to enrich your portfolio by means of thematic opportunities.

The Megatrends Model supports investors by allowing them to systematically integrate their personal know-how into the context of their portfolio – even in markets they may not be familiar with.

We call this: “Adapt and thrive”. Is your portfolio ready to turn changes into opportunities?

 

How do I manage my portfolio by means of investment themes?

Our Megatrends team has identified 12 thematic approaches and made them investable.

Get to know the thematics

  

  

Your way to our thematic investments

 

  

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FAQ: Frequently asked questions about Megatrend Investing

We answer the questions our experts are most frequently asked in connection with Megatrends and Megatrend Investing.

For an introduction to the topic of “Thematic Investing”, we also recommend our introductory event with virtual panel discussion (replay video available).

  

  • Why four Megatrends?
    I've also seen models that integrate three, five or seven Megatrends. What is the advantage of the Vontobel model with its four Megatrends?

    The aim of the Megatrends Model is to keep an eye on the future – an ambition that has always motivated investors. In doing so, however, one challenge is always the same: The more individual Megatrends you observe, the harder it is to see the overall big picture. On the other hand, if you are following too few aspects, you may miss important interrelationships.

    Our experience has shown that following four Megatrends is best for identifying and evaluating investment opportunities.

    “Simple rules of thumb have proven to be more effective than complex models for capturing changes efficiently.”
  • Trends vs. Megatrends: What is the difference?
    If I differentiate between trends and Megatrends, what is my advantage?

    “That’s a big trend now!” You often hear or read this statement, the point being to present something as desirable: something that you absolutely should have (i.e. buy). There is nothing wrong with that, but this kind of trendiness may not be far from hype, and it is associated more with short-term opportunities.

    “In contrast to Megatrends, trends are mostly entertaining diversions.”

    The Zeitgeist can take a different turn at any moment. Anyone thinking further ahead than just a few months or years when investing should make the distinction between trends and Megatrends. The Vontobel model helps you do this.

  • When is the best time to invest in Megatrends?
    Am I already too late if I start investing in Megatrends now?

    Generally speaking, no. That’s because these Megatrends didn't just begin today – and they won't end tomorrow. The model is designed in such a way that the point in time is not a priority. Instead, thematic aspects come to the fore.

    The question of timing is important, however, in the context of your personal portfolio. As it is currently set up, is your portfolio properly diversified and aligned in order to be able to take on the additional risks and opportunities that thematic investing will present? To be sure, the best thing to do is contact our Megatrend experts.

    Contact an expert

  • Will new Megatrends emerge?
    Should I expect that the four Megatrends will change as time goes by?

    In principle, no. The Vontobel model with its four Megatrends is configured in such a way that it can also integrate trends occurring in the future into the existing Megatrends.
    We believe that each Megatrend will remain valid for 25 to 30 years. The Coronavirus pandemic unintentionally put this claim to the test: Even fundamental events such as a global pandemic have not called the relevance of the model into question (more on this in the text above).

    Within the individual Megatrends, however, dynamics unfold that will lead to new investment opportunities – and this will happen over and over again.

  • What is the most important Megatrend?
    Which of the four Megatrends will have the greatest impact on my investments?
    Diagram: Four overlapping circular areas show the interplay of the four megatrends

    The strength of our Megatrends Model lies in its ability to capture future changes as comprehensively as possible. This holistic view can only come about because of the interaction of the four Megatrends, meaning that a fundamental part of the model is the recognition that the Megatrends overlap. This is an intentional aspect of the model, because investment opportunities arise based on the dynamic of how the Megatrends overlap and how interaction between them plays out.
    Technological change is the Megatrend that overlaps the most with the other three. Much of the progress and change that awaits us will only be made possible, or will be accelerated, by technological changes. Accordingly, the Megatrend “Technological Change” is at the center of our model and deserves the greatest attention from an investor's point of view.

     

  • Isn’t “Digitization” a Megatrend?
    Why do I not find digitization as a Megatrend in the Vontobel model?

    In its original definition, digitization refers to the digital representation, modification or execution of existing (i.e. analog) technologies and processes. From today’s perspective, this digital revolution (also called the “Third Industrial Revolution”) is only the beginning of a further, fourth revolution, often referred to in the media as “Industry 4.0”. Accelerated by artificial intelligence (AI) and Big Data, new fields of innovation are emerging that were previously unimaginable. That is why the broader term “technological change” is, to us, more apt.

  • Are there “Swiss Megatrends”?
    Can I invest in “Swiss Megatrends”?

    Yes, in principle this is possible. However, it is important to note in this context that the added value of the Megatrends Model lies in segmenting companies and equities thematically, not regionally. If you restrict the model to specific geographic regions, you will often also be narrowing the universe of the thematic investment opportunities.

  • Are Megatrends sustainable?
    The concept of sustainability is important to me. Am I not making a mistake here with Megatrend investing?

    Sustainability – or “sustainable value creation” – is explicitly one of the pillars of our Megatrend Model. And for good reason: The sustainable transformation of our society and economy for future generations is in full swing. This will naturally lead to a historical asset reorientation. As a globally active investment company, we are aware that we have a responsibility towards our stakeholders to play an active role in this restructuring.

     

    More on the subject of “sustainable investing”

    Symbol ActESG. Es kennzeichnet auf vontobel.com das Thema «ESG Investing»

    Please note the “Act ESG” watermark you will see on our website. This symbol signals our invitation to you to consider a sustainable investment opportunity and aims to help you make informed and active decisions concerning solutions in the area of ​​ESG (i.e. those following Environmental, Social, and Governance principles). ESG solutions allow you to align investment decisions with your personal convictions, to ultimately drive positive change, for the world – and also for your returns.
  • Megatrends vs. Thematic Investing: What is the difference?
    What is the difference between Megatrend Investing und Thematic Investing?

    Put simply, Megatrends form the structured framework upon which Thematic Investing is based. Megatrend Investing and Thematic Investing are therefore not at odds with one another, but rather in pursuit of the same goal: to find companies that are not so much dependent on short-term economic cycles, but rather ones that will create value and generate higher returns in the long term.

    For an introduction to the topic of “Thematic Investing”, we also recommend our introductory event with virtual panel discussion (replay video available).

    An overview of our thematic investments can also be found here:

    Get to know the thematics

     

  • What is “Thematic Investing”?
    What do I need to understand by the technical term “Thematic Investing”?

    Thematic Investing aims to capitalize on long-term trends that transcend economic sectors and geographic boundaries. Thematic strategies take into account the adaptation of companies to rapid change. In addition, “Thematics” include the drivers of long-term value creation and long-term risk.

    Thematic research aims to understand converging innovations and is therefore always undertaken across sectors, industries, and markets.

    For an introduction to the topic of “Thematic Investing”, we also recommend our introductory event with virtual panel discussion (replay video available).

  • What is the objective of “Thematic Investing”?
    Why is it worth adding thematic investments to my portfolio?

    We believe that innovation and change are the keys to a company’s long-term growth in revenues and profits. Our mission is to achieve long-term capital growth in a way that has little correlation with traditional investment strategies.

 

  

Do you have any other questions that concern you personally?


Contact our Megatrends team

 

  

 

Even the smallest undertaking starts with a conversation.

Megatrends and Thematics are the way to go when it comes to applying your own assets in harmony with your convictions. Would you like to take advantage of this approach in the context of your portfolio? We would be happy to advise you on this.

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