Where to look for structural growth

“Courage taught me no matter how bad a crisis gets… any sound investment will eventually pay off” – Carlos Slim Helu

One final, yet crucial, insight obtained from the world of alternative assets that can assist investors in navigating current turbulent economic and market conditions is to invest on the basis of structural trends and growth. Investing in ‘megatrends’, or thematic investing, ensures that an investment will retain strong performance throughout its holding period and will have the opportunity for a strong exit. WAM Alternative Assets (ASX: WMA), a listed investment company which provides retail investors with unprecedented access to a diversified portfolio of alternative assets, has identified four megatrends that guide its investments: digitalisation, climate change, growing demand for food and aging populations.

Digitalisation is a megatrend everyone is familiar with, with technology transforming virtually every aspect of our global economies, societies and individual lives. Perhaps the most evident investment opportunity underpinned by the digitalisation megatrend are investments in venture capital or private equity growth strategies that focused on this thematic, which provide funding and strategic guidance to early-stage companies looking to develop innovative technologies, bring them to market and scale. The potential investment opportunities created by this megatrend, however also span across other asset classes. For example, digitalisation is supporting the growth of digital infrastructure, which is necessary to support our increasing adoption of and reliance on digital modes of living and working, encompassing investments in assets such as telecommunication towers, fibre networks and data centres.

Climate change is another megatrend that is creating an abundance of investment opportunities that seek to support the global push towards decarbonisation and energy transition. Some conspicuous investment opportunities that the climate change megatrend supports are infrastructure investments in renewable energy assets. Similar to digitalisation, this is a global thematic that is having a transformative impact across industries and asset classes. For instance, within real estate, assets that take advantage of value-enhancing features such as building retrofits to improve energy efficiency and upgrades to heating, cooling and lighting technology can improve their returns, while those that fail to do so will face additional risks.

Another megatrend that is creating an abundance of investment opportunities is the growing demand for food globally. According to an estimate by the United Nations, our global population will reach 9.7 billion by 2050, which will occur alongside rising incomes and standards of living in developing countries (Harvard Business Review, 2016). There is significant room for innovation on the basis of this megatrend, exemplified by glasshouse facilities which are emerging within the Australian market as alternatives to field-grown farming operations. These glasshouses are generally environmentally sustainable, efficient, and able to produce high-quality crops all year round without being impacted by climate or weather events, demonstrating potential to disrupt the Australian agricultural industry.

Lastly, aging populations represent one of the most significant demographic shifts of our time, occurring as a result of declines in fertility rates and improvements in living standards. The most significant opportunities here lie within the healthcare space. There are lucrative investments in healthcare real estate within hospitals, specialist facilities, medical centres, research facilities and laboratories that are underpinned by the aging population megatrend. Income from the operators (i.e. healthcare service providers) and the capital appreciation of these properties is supported by growing demand for these essential services.

Investing on the basis of these megatrends ensures that even amidst current market uncertainty, investors can maintain conviction about the dependable growth that can be delivered by their investments. Through an investment in WAM Alternative Assets (ASX: WMA), retail shareholders gain access to a broad range of alternative asset classes that are typically only available to large institutional investors.

Learn more
WAM Alternative Assets provides retail investors with exposure to a portfolio of real assets, private equity and real estate. The company aims to expand into new asset classes such as private debt and infrastructure. For further information, please visit their website.