InSync Funds Management has outlined how its fund is investing in megatrends and the three areas where they are demonstrated.
The firm said it sought companies by looking for ‘megatrends’ which created tailwinds for quality companies and could extend their success. These were characterised by being disruptive, persistent, profitable, interdependent and with a long shelf life of least 10 years.
“A defining characteristic of how we select stocks, how long we retain them, and how it may drive superior success is the process of identifying megatrends and how they can impact a company’s long-term success,” the firm said.
Three megatrends the firm had identified were infrastructure, demographics and new services.
Demographics included medical services, catch-up consumption, Africa and travel recovery. Infrastructure covered cloud computing, industrial connectivity, high speed broadband and digitisation while, lastly, new services included cashless society, data analytics and video explosion.
The firm’s Global Quality Equity fund and Global Capital Aware fund both had 16 megatrends within their portfolios.
In the example of demographics, this included holdings such as travel company Bookings Ltd and beer producer Heineken.
“Africa’s rise from extreme poverty is by no means over with a long-term large fast growing increasing disposable income population segment. A segment that’s fixated on the consumption of beer and has a relatively very low product penetration today,” InSync said.
“Margins that beer producers make in Africa despite the corruption, conflicts and poor infrastructure are much larger than in developed nations and even than in China. Matched with our quality overlay this resulted in Insync holding a position in Heineken.
“Travel is booming across the planet and the suppliers and services that feed off this long-term trend will only get bigger as more and more nations (e.g. China and Indonesia) also mature. It is no fluke that a company that not only harnessed clever technology and strong management also enjoys this tailwind. Bookings Ltd is better known as Bookings.com and Agoda.com.”
According to FE Analytics, the Global Capital Aware fund had returned 18.4% over one year to 30 April, 2021, while the Global Quality Equity fund had returned 22.8% over the same period compared to returns by the Australian Core Strategies global sector of 26.5%.
