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During each new business cycle for the past 40 years, Wellington investors have been presented with a challenge: Look past current headlines to find structural trendlines that will shape markets, society, and the economy in the next five to 10 years. It’s not an easy exercise. We must take a step back from our day-to-day work to broaden our research focus, collaborate with colleagues with whom we may not routinely interact, and debate some very big ideas.
Future Themes takes us out of our comfort zone, compelling us to think creatively about longer-term opportunities and risks that may not yet be on our radar — or the market’s radar. Our goal is to find diamonds in the rough, starting broadly and using our collaborative research approach to narrow the field down to early, non-consensus investment ideas that represent potential alpha opportunities. Past Future Themes projects have led us to develop a number of approaches for our clients, including impact and thematic investing strategies.
The purpose: From ideation to insight
Future Themes has a history of prescient research ideas. In 1981, a submission urged investors to look more closely at China for its nascent capitalist overtones and massive potential market. In 1984, investors sought to research a theory that immunology was a rapidly developing field that would be hugely consequential over the next decade. In 1999, a research idea centered on the prediction that the massive wave of internet adoption would lead to the spread of fraudulent or misleading information, with broad societal consequences.
This year, we canvassed Wellington partners and employees worldwide who submitted more than 600 ideas. A small sampling of the provocative questions and theories submitted includes some wide-ranging ideas:
- If you were forced to become a climate migrant, where would you go?
- If you could upgrade your body and mind, would you do so? How will technology enhance human strength, mobility, dexterity, and cognition?
- If you could maintain your living standard but had 50% more free time, how would you spend it?
- If all financial assets, including real estate and private equity, had the same liquidity, how would you invest?
- Is the definition of economic success changing? Should GDP encompass innovation, inclusion, and sustainability?
The process: Using data science to narrow the field
At the outset of the project, the Future Themes working group canvassed Wellington partners and employees worldwide for ideas. Ideas were submitted from every global office, representing a wide range of roles and demographics across business and investment lines. With the help of our Investment Science Team, we used data analytics to collect and chart the initial submissions to identify patterns, commonalities, and outliers. We then curated and synthesized the ideas, creating a taxonomy that would ultimately enable us to decide where to focus.
The four top-level structural areas for Future Themes are Sustainability, Society, Science, and Systems. We divided these into 11 thematic clusters, and then into 49 individual themes (Figure 1). From there, we formed research teams and assigned captains to lead their respective research agendas. Each team is responsible for selecting two to three focus areas on which to conduct their fundamental research.
Throughout 2021, as our research progresses we will share our findings and insights, and engage in conversations with clients to deepen the discussions. We plan to publish a series of articles and podcast interviews with members of our research teams. Finally, toward the end of the year, we will collect these insights on a website available to our clients globally.
Future Themes is a unique endeavor that feeds into and enhances Wellington’s ongoing thematic investing efforts. Long-term trends like climate change, emerging markets development, automation, and many others frequently represent underappreciated investment themes. By gaining a deeper understanding of the economic, technological, and consumer dynamics behind those themes, we believe we can identify attractive opportunities.
The next piece in this Future Themes series will offer an overview and description of the individual research projects underway.