Uncertainty is driving short-termism among fund managers and has cast doubt on the viability of growth from underlying structural trends, according to Nicky Stafford, portfolio manager for Fidelity's global demographics fund.
Investing in demographic trends could provide certainty for investors, while macro considerations could create uncertainty and drive short-term decision-making, she said.
"We (fund managers) all say different versions of the same thing. We're all looking for compelling investments at attractive evaluations. It's simple enough in theory but as we all know, having experienced the last few years, there is an enormous amount of uncertainty out there," she said.
Macro considerations often created "short-term" noise and left fund managers unable to see the forest for the trees, Stafford said. Decisions were often made on a 6-12 month basis – or if they were "generous", on 24-month projection.
"To be honest it's very difficult to come up with a high conviction answer to any of these questions. The reason we ask these questions is because there's uncertainty out there which casts doubt on the conviction and viability of growth drivers of several areas of the market," she said.
Demographics was the single most important theme of this lifetime, Stafford said – it was a certainty that the population would expand, age and grow wealthier.
The ramifications of these certainties would include an increase in the demand for resources, a new middle class and a growing demand for healthcare. Business models that hold demographics at their core would have staying power and/or the ability to grow, according to Stafford.
Well-established countries that traded on the evolution of the global population would have slower growth but provided stable returns, she said, while fledgling companies that capitalised on new consumer and product markets would experience high growth over the coming years.
