We are on the cusp of a new digital wave, where even more things are going to become virtual, says Richard Speetjens, Head of Trends Investing. In our 2022 outlook interview series, Robeco’s experts answer five key questions about their investing arenas.
“I would highlight two topics here. Firstly, I think we’re on the cusp of a new digital wave, where even more things are going to become virtual. Think about crypto, and more generally digital currencies. These currencies are becoming mainstream, and have started to become an alternative to the existing financial infrastructure, thanks to the blockchain protocols upon which they rely.”
“New products and services range from the now famous non-fungible tokens (NFTs) to other types of services, for which contact with a salesperson was needed in the past. Now, everything can be done digitally in a much more secure way. Of course, we cannot invest directly in these protocols, but there are listed companies that facilitate these decentralized projects.”
“Also related to this digital wave is what we call the rise of the metaverse. These are virtual worlds where young consumers are spending an increasing amount of time. They have their own image within these virtual worlds, and spend quite some time to look really good in them. These are still early days, but I think a lot of investments are heading in that direction.”
“Meta Platforms, the former Facebook, for one, recently indicated it was investing massively in its Facebook Reality Labs business.1 I don’t mean we are all going to walk with virtual-reality glasses tomorrow, but this topic is certainly something we need to follow, because the metaverse can coexist with the physical world, and you will probably get hybrid forms of the two.”
“Secondly, on the sustainability side, I think the recent rise in commodity and energy prices is likely to further accelerate the adoption of renewable energy sources. This should also incentivize further use of smart materials, to save energy and costs, and speed up the transition towards electric vehicles.”
“In many countries, renewables have already become one of the cheapest sources of electricity. Meanwhile, we seem to be at an inflection point regarding electric vehicle adoption. The cost of ownership for this type of vehicles has come down significantly, while an increasing number of models are becoming available on the market.”
“From a thematic investing perspective, the pandemic has accelerated most of the trends our strategies aim to benefit from. This is clearly visible in areas such as digital payments, or ecommerce, for example. Moreover, we have also seen that these trends do not reverse when economies reopen. They may slow down, but they remain in place as new habits persist.”
“For instance, older generations that had been slower to move online for many daily tasks have now largely caught up. New consumer behaviors are likely to persist after the pandemic. For example, the share of ecommerce as a percentage of total retail sales has remained stable after the leap seen in 2020. That is much better than what we had initially expected, after the great lockdown of 2020.”
“The same goes regarding people’s growing focus on sustainability and climate change. Awareness has increased dramatically, and we see a strong and durable acceleration in green technology and infrastructure spending. Some of this spending is even related to the aftermath of the pandemic, as governments strive to kickstart their economies.”
“I think the very long-term stance we take, as thematic investors, is probably where I feel most out of consensus. As a portfolio manager, I always focus not only on the competitive advantages of a company at any one point in time, using all kinds of measures of profitability, but also on the durability of those competitive advantages.”
“I think that when a company has a certain competitive advantage – this can be superior technology, brand, you name it – this advantage can sometimes be much more durable than most investors expect. So, it is not so much the trends we focus on that make us special – most of them are actually very consensual – but rather our take on these trends and how they can be sustained over time.”
“This means, for example, that we are sometimes willing to pay higher multiples for some companies because we see higher long-term return potential than most investors. This also means that we sometimes enter these trends earlier than most investors, and also tend to exit later.”
“Rising regulatory pressure on the digital economy has become a topic we cannot dismiss anymore, and that is likely to remain top of mind next year. Regulation is not a new challenge per se, since navigating regulatory risks has always been part of what investors have to do. But the rising pressure is here to stay, and we need to take it into account where it is becoming much more invasive.”
“Another issue raising many questions among clients has to do with real interest rates. For now, they remain extremely low, but that could change. Many of our strategies are exposed to growth stocks, which tend to be more sensitive to real interest rate increases. A quick sharp rise would probably have an impact, not so much on the fundamentals, but on valuations.”
“This is something we need to monitor closely, especially in the current context of uncertain economic recovery and surging inflation. I mean, the companies we invest in generally have relatively high pricing power and could certainly handle a general rise in inflation, without sacrificing margins. The question has more to do with real interest rates.”
“One of the things a trends investor must always keep in mind is to remain curious and open-minded, especially when it comes to considering areas where it is still very difficult to imagine what the future will look like. The advent of digital currencies or the metaverse, which we just talked about, are a case in point. These are phenomena that are easy to dismiss as a bubble or a fad.”
“We must listen to different opinions, and avoid downplaying novel technologies, or businesses, as hypes. Digital currencies and the metaverse, for instance, show elements that remind me of the internet 25 years ago. So, staying open-minded will be my ambition for 2022, because I am sure I will attend more than one meeting where I’ll probably end up wondering about the immediate investment consequences.”
1 Culliford, E. and Balu, N., 26 October 2021, “Facebook invests billions in metaverse efforts as ad business slows”, Reuters news article.
The Robeco Capital Growth Funds have not been registered under the United States Investment Company Act of 1940, as amended, nor or the United States Securities Act of 1933, as amended. None of the shares may be offered or sold, directly or indirectly in the United States or to any U.S. Person (within the meaning of Regulation S promulgated under the Securities Act of 1933, as amended (the “Securities Act”)). Furthermore, Robeco Institutional Asset Management B.V. (Robeco) does not provide investment advisory services, or hold itself out as providing investment advisory services, in the United States or to any U.S. Person (within the meaning of Regulation S promulgated under the Securities Act).
This website is intended for use only by non-U.S. Persons outside of the United States (within the meaning of Regulation S promulgated under the Securities Act who are professional investors, or professional fiduciaries representing such non-U.S. Person investors. By clicking “I Agree” on our website disclaimer and accessing the information on this website, including any subdomain thereof, you are certifying and agreeing to the following: (i) you have read, understood and agree to this disclaimer, (ii) you have informed yourself of any applicable legal restrictions and represent that by accessing the information contained on this website, you are not in violation of, and will not be causing Robeco or any of its affiliated entities or issuers to violate, any applicable laws and, as a result, you are legally authorized to access such information on behalf of yourself and any underlying investment advisory client, (iii) you understand and acknowledge that certain information presented herein relates to securities that have not been registered under the Securities Act, and may be offered or sold only outside the United States and only to, or for the account or benefit of, non-U.S. Persons (within the meaning of Regulation S under the Securities Act), (iv) you are, or are a discretionary investment adviser representing, a non-U.S. Person (within the meaning of Regulation S under the Securities Act) located outside of the United States and (v) you are, or are a discretionary investment adviser representing, a professional non-retail investor. Access to this website has been limited so that it shall not constitute directed selling efforts (as defined in Regulation S under the Securities Act) in the United States and so that it shall not be deemed to constitute Robeco holding itself out generally to the public in the U.S. as an investment adviser. Nothing contained herein constitutes an offer to sell securities or solicitation of an offer to purchase any securities in any jurisdiction. We reserve the right to deny access to any visitor, including, but not limited to, those visitors with IP addresses residing in the United States.
This website has been carefully prepared by Robeco. The information contained in this publication is based upon sources of information believed to be reliable. Robeco is not answerable for the accuracy or completeness of the facts, opinions, expectations and results referred to therein. Whilst every care has been taken in the preparation of this website, we do not accept any responsibility for damage of any kind resulting from incorrect or incomplete information. This website is subject to change without notice. The value of the investments may fluctuate. Past performance is no guarantee of future results. If the currency in which the past performance is displayed differs from the currency of the country in which you reside, then you should be aware that due to exchange rate fluctuations the performance shown may increase or decrease if converted into your local currency. For investment professional use only. Not for use by the general public.