8 Jul 2021
Investcorp in partnership with Mercury Capital Advisors, a leading institutional capital raising and investment advisory enterprise, IMD Business School and Banque Pâris Bertrand, an independent, Swiss-regulated private bank based in Geneva and Luxembourg, today announced the results of the second iteration of its annual survey, “What’s Next? Investment Trends for the Future.” The poll explored institutional investors’ sentiment and allocations regarding the most pressing economic trends that are expected to shape the global economy over the next three decades.
95% of institutional investors and family offices identified Automation, Digitization and Artificial Intelligence (AI) as the top trend they believe will shape the global economy over the coming decades. Aging Population (69%) and Climate Change (65%) were listed by investors as the second and third highest-ranked trends, respectively.
“Institutional investors’ view of the major trends that are to shape the global economic landscape over the next three decades can give us significant insight into where capital is likely to flow in both the near- and long-term,” said Rishi Kapoor, Investcorp’s Co-Chief Executive Officer. “In this year’s survey, we see Digitization and AI as an area ripe for investment. An aging global population and ongoing concerns with climate change also provide ample opportunities for these investors to capture the economic upside associated with these mega trends either through direct investment or, more commonly, by allocating to external managers.”
Rounding out the top ten trends are, in order:
- Automation, Digitization and AI (95%)
- Aging Population (69%)
- Impact of Climate Change (65%)
- Electric Vehicles and Autonomous Driving (62%)
- Personalized Healthcare (60%)
- Growing Dominance of China (59%)
- Digital and Cryptocurrencies (59%)
- Urbanization and Smart Cities (38%)
- Sustainability and the Circular Economy (37%)
- Redefining Global Trade (26%)
New to the list this year were the emerging Dominance of China and Digital and Cryptocurrencies, demonstrating that a significant portion of respondents see them not as short-term trends, but those that are here to stay and deserving of significant attention and capital allocation.
The top results also showed interesting findings within the data.
- Automation, Digitization and AI: Nearly 95% of investors polled cited that Automation, Digitization and AI as the top trend that will shape the global economic landscape and were more likely to invest in this trend via a combination of both public and private markets (53%). The majority of investors feel that the significance of automation, digitization and AI will be especially felt over the next two decades, with meaningful progress in key industry segments to occur seven years from now.
- Aging Population: Two thirds of investors expect the aging population trend to maintain its importance until at least 2050, indicative perhaps of both the large senior living welfare funding gap that exists today and the equally attractive investment opportunity that it presents over the long term. Investors feel that healthcare and retirement services present the greatest opportunity and expect meaningful investment opportunities to arise ten years from now.
- Impact of Climate Change: Climate change was ranked as the third most significant trend. Notably, almost all investors expect climate change to significantly shape the global economy over the next two decades; which is consistent with global developments in addressing climate change risks and opportunities. Participants were more likely to invest in the impact of climate change through both public and private markets (63%), as opposed to favoring one over the other. Approximately half of all investors expect meaningful developments across several industry segments this decades. Over the short term, investors expect the greatest opportunities to be within the renewable energy and clean technology segments.
- External Managers vs. Direct Investing: Investors continue to prefer allocating funds to external managers over direct investing; this also holds true regardless of whether the investment strategy is exclusively private, exclusively public, or mixed in approach.
- Private Markets vs. Public Securities: Institutional investors were either tilted towards private or public markets; not surprisingly, private markets-tilted investors had the highest expectations in terms of future overall target returns, exceeding public market expectations by 400bps.
Methodology: The “What’s Next? Investment Trends for the Future” study was commissioned by Investcorp, respondents were approached by Mercury Capital Advisors, Bank Pâris Bertrand, as well as Investcorp, and the data was collected and analyzed by IMD Business School, to investigate key trends that investors believe will shape the global economy over the next 30 years and how they would seek to gain exposure to these trends within their investment portfolios. The survey received responses from investors from across the world representing a range of institution types including: pension funds, sovereign wealth funds, foundations, endowments, insurance companies, consultants, funds of funds and family offices. Respondents included senior executives at their organizations identifying themselves as CIOs, heads of investment groups, managing directors and partners. Survey participants included those who managed portfolios with private markets and public markets tilts.