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Frankfurt/Main, 22 September 2015 – Today’s successful blue chips must change radically to avoid being crushed under the digitisation wave. Going forward, structural trends will have much greater implications on earnings than the general economic development, says the Multi Asset team of MainFirst Asset Management. “Long-term investors should look not so much to the economic cycle and rather pay greater attention to structural trends,” recommends Frank Schwarz, manager of the MainFirst Absolute Return Multi Asset Fund and the MainFirst Global Equities Fund.
The time to market for inventions becomes ever shorter. “After the invention of electricity, it took about 50 years until one quarter of households in the US had access to electricity,” explains Schwarz. It was about 30 years for the radio and 25 years for television. “The Internet made its way into people’s homes in only six years. And it took only four years until one quarter of all Americans used Facebook.” This clearly indicates that businesses around the world are indeed facing tremendous change. MainFirst’s Multi Assets experts are convinced: “Today‘s big corporate winners need not automatically be the winners of tomorrow – on the contrary.” They point out that small companies are often nimbler and more innovative and can beat their big competitors through innovation. “We currently see that many large companies are missing out on the trends of tomorrow or lack the innovative strength to defend their position over the medium to long term,” says Schwarz.
He points for instance to the global media industry where digitisation shakes up traditional business models across book and music publishing as well as the photographic industry. Automotive manufacturers that fail to sufficiently address the trend towards sharing concepts and alternative drive technologies are suffering a similar fate. “When the internal combustion engine was invented, many carriage manufacturers dismissed it as new-fangled nonsense. Later, some of them simply added an internal combustion engine to their horse carriages instead of daringly embracing the new technology. And today? Some vehicle manufacturers are betting on the success of hybrid technology, adding a weak electronic engine to their internal combustion engine, instead of developing a drive system that has the capacity to take us into the future,” explains Schwarz. Conversely, small companies or firms outside of the automotive industry are taking the lead in the technology for driverless cars. “Silicon Valley is also witnessing the emergence of new high-performers for instance in software development that rely on their digital know-how to compete with business groups across several traditional industries at the same time,” explained Schwarz. Cloud technologies and payment systems for instance also affect retail groups, industrials, banks and the tourism industry.
Longer-term oriented investors should account for this shift in their positioning by taking greater exposure outside of hitherto successful major corporations, recommends MainFirst fund manager Schwarz. This also applies to equity indices that consist of the strongest companies of the past. “The MainFirst Absolute Return Multi Asset Fund and the MainFirst Global Equities Fund seek to invest in companies that are innovative and fit for the future and can participate in the emerging trends of tomorrow. These structural winners make it into our portfolios if they have attractive valuations. We see many opportunities particularly along the US West Coast,” says Schwarz.
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