- Portfolio Manager
- About Us
- My Account
The views expressed are those of the authors at the time of writing. Other teams may hold different views and make different investment decisions. The value of your investment may become worth more or less than at the time of original investment. While any third-party data used is considered reliable, its accuracy is not guaranteed. For professional, institutional, or accredited investors only.
A variety of secular trends are spurring innovation and disruption in the global economy and creating what we believe are attractive thematic investment opportunities. In this series of articles, we take a close look at some of these trends, the breadth of the opportunity set and the related risks.
Here, we focus on the future of food, a broad and, we believe, era-defining theme that brings together the interests of individual citizens, policymakers, health experts, environmentalists and innovators.
Among our key conclusions:
We see several trends that we believe will, over time, spur innovation and investment opportunities in the global food system:
Dietary changes — With the increased use of sugar, salt and trans fats, food has become less healthy and contributed to rising obesity rates across all income groups (Figure 1) and an increase in diet-related diseases around the world, including high blood pressure, diabetes mellitus, and heart disease. Notably, while affluent countries have greater access to nutritional foods, they also have higher obesity rates, as consumers tend to opt for energy-dense and nutrient-poor foods. Despite changing diets, we think this phenomenon and the associated health costs are likely to persist for the foreseeable future.
At the same time, there is growing awareness of the role nutrition plays in holistic wellness, driven in part by government efforts, including educational campaigns and dietary guidelines. The consumer understanding of a healthy diet also continues to evolve, from a focus on low-fat, low-calorie choices to a preference for foods fortified with healthy ingredients, high-protein foods and supplements.
In addition, food science and nutritional genomics have allowed for dietary customisation, including allergy/intolerance solutions and alternative proteins. And, importantly, consumers are prepared to pay: 80% of millennials say they are willing to spend more for the perceived benefits of a healthier diet.1
Obesity is a global health challenge today, creating a large market for the treatment of associated diseases such as diabetes. A US-based company has been taking an innovative approach to insulin management, focused on tubeless and wireless technologies that may offer a variety of advantages over conventional pumps.
Example is for illustrative purposes only and not intended as an investment recommendation.
Growing demand — Current demand and population trends indicate that the world needs to produce 60% – 70% more food globally by 2050.2 Much of the demand will be in emerging markets, where calorie demand growth is highest, driven by population growth and increasing GDP per capita, but affordability and accessibility are lowest.
Meeting this demand will require productivity-enhancing technologies (the primary source of crop yield growth, as shown in Figure 2), including the continued mechanisation/digitisation of the farming process and the development of alternative farming methods. After decades of scant government funding for agricultural R&D, we believe these innovations will benefit from growing policy support in the years ahead, made critical by the increasing impacts of climate change and land degradation.
Food security — Even as demand grows, the weaknesses in global food supply chains have been on display and raised issues related to food production and self-sufficiency to the level of national security concerns. For example, 65% of the world’s wheat comes from just five markets: Europe, China, India, Russia and the US (Figure 3), all of which have experienced some form of production disruption in recent years (war, extreme weather, export controls).
Over the long term, climate change in particular poses a significant risk to food supply and security, as it makes weather patterns less predictable, leading to greater variability in crop yields. Resource scarcity is a concern as well, with the loss of arable land due to urbanisation, industrialisation and reduced biodiversity.
Presently, very few countries can claim food self-sufficiency, and populations are growing fastest in the parts of the world with the most fragile food supply chains. With this in mind, we expect strong long-term demand for solutions to food security, including innovative approaches to improve crop and animal health and yields.
A British company is utilising advanced genetic and data gathering techniques to improve animal breeding technologies. This may help reduce disease, use of antibiotics, and methane emissions while increasing efficiency (more protein with less food, water, and waste). Animals may also be more resilient amid the increasing effects of climate change.
Example is for illustrative purposes only and not intended as an investment recommendation.
Sustainable food — Globally, the “farm to fork” value chain — from fertiliser production to food packaging manufacturing — is responsible for an estimated 26% of global greenhouse gas emissions.3 Beyond direct emissions, poor production practices have also had knock-on effects such as excessive water consumption, soil degradation and loss of biodiversity.
Given the expected population growth, the world will require less destructive ways to generate calories for human consumption. Fortunately, many of the same technologies needed to improve productivity, mentioned above, can also help drive resource efficiency, requiring fewer inputs (for example, fertiliser and water). Other potential solutions include nonanimal sources of protein (to reduce the carbon footprint associated with animal meat) and alternatives to plastic packaging (given the lack of recycling infrastructure).
Finally, we see regulations promoting a circular economy, renewable fuels and agricultural innovation as a critical development. For example, Europe’s Farm to Fork Strategy, established in 2020 as part of the European Green Deal, seeks to reduce dependency on pesticides and excess fertilisation, increase organic farming and support the use of sustainable packaging, among other changes.
We believe these trends will benefit a wide variety of companies and industries, including:
As with any investment theme, there are risks to our outlook, including government inaction, geopolitical risks and wealth-destructive inflation. But we believe that there will be meaningful changes ahead in food consumption and production, and that long-term-oriented investors will find attractive opportunities aided by demographic, policy and innovation tailwinds.
2Sources: World Bank, Food and Agriculture Organization of the United Nations
3Source: Our World in Data
How a thematic approach can help harness change within portfoliosContinue reading
Thematic investing focus: Cloud-backed AI and enterprise intelligenceContinue reading
The allocator’s perspective: three key decisions on EM equitiesContinue reading
Thematic investing focus: The education imperativeContinue reading
Why investing in themes for EM equities may reap rewardsContinue reading
Adding thematic equity investments to a multi-asset portfolio: An allocator’s handbookContinue reading
Thematic investing focus: The transportation revolution has arrivedContinue reading
How a thematic approach can help harness change within portfolios
Multi-Asset Strategist Supriya Menon and Investment Director Andrew Sharp-Paul discuss why a thematic approach can help harness change within portfolios against a structurally different macroeconomic backdrop.
Thematic investing focus: Cloud-backed AI and enterprise intelligence
Cloud-based computing and artificial intelligence are transforming the way enterprises operate, creating what we believe will be a secular tailwind for companies providing software, machine learning tools, and cybersecurity.
The allocator’s perspective: three key decisions on EM equities
How can investors best access opportunities within an improving outlook for emerging market equities? Natasha Brook-Walters, co-head of iStrat, shares three key decision points for allocators.
Thematic investing focus: The education imperative
Education is poised for transformation — and set to see a decade of spending and growth we believe will be unmatched by any since the post-World War II boom.
Why investing in themes for EM equities may reap rewards
Portfolio Manager Dáire Dunne outlines why he is increasingly optimistic about the potential opportunities within select EM equity themes this year.
Adding thematic equity investments to a multi-asset portfolio: An allocator’s handbook
Thematic investing may add a powerful return engine to portfolios, but allocators sometimes struggle with implementation decisions. Members of our Investment Strategy Team offer a framework for thinking about allocation size, strategy selection, and performance evaluation.
Thematic investing focus: The transportation revolution has arrived
New technology and environmental concerns are creating a disruptive force in the transportation sector, leading to supply-chain investments and a host of new addressable markets.
Have we reached the end of a tech era?
Thematic Strategist Trevor Noren explores how active management and a global lens could provide tech investors with essential edges moving forward.
Thematic investing: Long-term thinking for a short-term world
With economic conditions expected to remain volatile in the coming year, members of our Investment Strategy team suggest that thematic allocations may help reduce the importance of the cycle to portfolio returns.