The global cohort of people aged 60-plus is expected to double by 2050, leaving 22 per cent of the population increasingly in need of advanced care and other services tied to aging. At the same time, billions of people are expected to enter the middle class, while workers around the world will need re-training due to the impact of artificial intelligence. While these trends are distinct, they all present opportunities for savvy advisors and their clients.
“These are huge themes that will require trillions of dollars in investment and will generate long-term returns for strong companies engaged in these areas,” says John Bai, chief investment officer of NEI Investments.
To help clients achieve their goals, advisors are always seeking an edge, which can come through identifying what drives corporate performance. Two key factors are often overlooked, Mr. Bai says. One is the growth opportunities that can emerge from long-term secular trends reshaping society, from health care to transformational technology, which the market often underestimates in duration and magnitude. Another is a strong corporate culture, which can propel innovation and outperformance.
With Canadian equities representing just about 3 per cent of global stock market capitalization, the problem for Canadian investors is gaining broad access to those opportunities. The new NEI Global Corporate Leaders Fund intends to do just that – create a path for Canadians to invest in a diverse group of companies with quantifiably strong corporate cultures that are working to address macro socioeconomic trends.
“Many Canadian investors understand these themes, but don’t know how to access them. Because society is changing, your investments need to as well to take full advantage. That's exactly what this fund is structured to do,” Mr. Bai says.
NEI Investments, a subsidiary of Aviso Wealth Inc., has carved out a leading position in impact investing, which provides investment options with a twin mandate of driving performance and positive outcomes for society.
London-based Impax Asset Management, which has about $65.5 billion in assets under management, is the subadvisor for NEI Global Corporate Leaders Fund. Impax is a specialist asset manager, founded in 1998, which invests in the opportunities arising from the transition to a more sustainable global economy. The firm seeks to invest in higher-quality companies with strong business models that demonstrate sound management of risk.
NEI Global Corporate Leaders Fund uses a “social taxonomy” to identify long-term growth opportunities driven by demographics and societal needs. To be eligible, companies must generate more than 20 per cent of their revenue from products or services that benefit society in the transition to a more sustainable economy. Meeting basic needs, broadening economic participation and improving quality of life are the three central pillars in this taxonomy.
Impax also uses a proprietary corporate culture framework to score companies. Historically, organizations with strong corporate cultures have engaged employees and higher productivity. “That drives higher earnings, which should deliver shareholder returns,” Mr. Bai says.
Amber Fairbanks, portfolio manager at Impax, adds that the firm takes “the available and relevant social data and uses that to identify companies showing indications of strong cultures.” That’s useful from an investor standpoint because “we believe these companies outperform over time.”
The fund is overweight in healthcare, consumer staples and consumer discretionary, all sectors with relatively little presence in Canada. “So, a fund like this will have material geographical and sector diversification benefits for Canadian investors,” Mr. Bai says.
The investment process starts with evaluating companies that have high exposure to long-term secular trends shaping society, and that show indications of a strong corporate culture. From there, the team employs deep fundamental research to identify high-quality companies, with strong competitive positioning trading at attractive valuations.
“We look to identify long-term secular trends that are shaping societies, such as aging populations, rising income in emerging markets and the democratization of technological transitions,” Ms. Fairbanks says.
The Impax team focuses on understanding the drivers of these thematic sectors, then finding the companies positively exposed to them as these companies should see economic tailwinds as a result.
Stock holdings range from Wolters Kluwer N.V., a Netherlands-based information services provider with education and professional training products, to Intuitive Surgical Inc. a biotechnology mid-cap specializing in robotic surgery.
“The approach is how do we take these investment themes, generate long-term performance for our investors, and have a positive impact on the planet and on people,” Mr. Bai says.
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