Digitization is transforming
the world around us.
We believe this revolution can address
some of the greatest
challenges facing humanity,
such as slow productivity growth
and aging populations.
In light of this, we've long argued that digitization
represents an unstoppable trend: a powerful long-term force
with far reaching implications for the economy,
businesses and investors.
So, where might some of the opportunities
with digitization lie?
In Outlook 2023, we highlighted three areas
where we identify transformational potential.
With a growing shortage of human labor in various countries
we see an increasingly important role
for robotics and automation.
Annual installations
of industrial robots
rose sharply after COVID hit,
particularly in Asia.
With much of this activity focused
in just five countries globally,
industries elsewhere will
likely have to play catch up
in the coming years and decades.
Next, we turn to semiconductors
whose processing power
enables almost every aspect
of the digital revolution.
Given our constant and growing demand
for microchip technology,
we regard this as a critical industry
and a key component of long-term portfolios.
We then consider the metaverse:
the emerging 3D virtual world
that we see as the future of the internet.
By 2030, we believe the metaverse could be on its way
to a dominant position within the digital economy,
worth many trillions of dollars annually.
Among the many potential beneficiaries of this virtual world
are specialists in optics and other sensors,
display and chip technologies.
Having performed strongly during much of the pandemic,
digitization investments have struggled since 2021.
We believe this is more to do with rising interest rates
and previous valuation issues
than with digitization's prospects.
We therefore reiterate our long-term conviction
in this unstoppable trend, including in areas
we've highlighted previously
such as fintech and cyber security.
For exposure, we favor equity strategies
from specialist managers as well as
private market strategies for suitable investors.
Digitization has far to go.
Get ready for the revolution's next stage.