Megatrends: How to align your ETF portfolio with global developments

Megatrends are the major global forces disrupting and reshaping our world. From technological innovation to demographic change to geopolitical shifts in power, you can surf these megatrends using ETFs.

Megatrends: How to align your ETF portfolio with global developments Nobody can hide from the megatrends. They are the irresistible waves of change that are transforming the economic, social and political fabric of the world. The megatrends can create and destroy entire industries and markets. They can push new actors onto the economic stage. They can force rapid reorganisation of businesses and supply chains. And they can make 20th Century Sci-Fi prophecies come true as Artificial Intelligence replaces people in the workplace and self-driving cars become a reality. 

Investors can benefit from the megatrends too via new ETF products designed to harness their power. US ETF providers have pioneered these developments with ETFs such as ROBO (robotics and automation) and HACK (cybersecurity). And where the US leads, Europe is bound to follow; there’s now increasing momentum around megatrend ETFs here, so let’s take a look at the main dynamics and how you can gain exposure to them.


Megatrend: ageing population

It’s well known that global populations are ageing due to declining birth rates and/or rising life expectancies. Naturally, this has major implications for business models, especially those linked to the healthcare industries. Some companies are well aligned with this megatrend, especially those that are working on new medical treatments and pharmaceuticals targeted at age-associated diseases such as Alzheimers, cancer, arthritis, etc. 

Megatrend ageing population ETFs:

Megatrend: technological progress and automation

Futurists like Ray Kurzweil believe that technological progress is accelerating exponentially. Moore’s Law is the most famous example of this thesis as it posits that computer processing power doubles approximately every 2 years. Advances in computing power and associated technologies like AI are expanding the abilities of machines to compete with or complement humans, and companies are racing to be at the forefront of the ‘rise of the robots’. 

Megatrend technological progress and automation ETFs:

Megatrend: digitalisation and information technology

The digital disruption of existing industries has already transformed music, media, communications, retail and financial services among others, and it shows no sign of slowing down. Countless start-ups are currently plotting the disintermediation of vulnerable legacy firms and hoping to join the likes of Facebook, Amazon, Alphabet, Netflix and Uber as the stars of the future. 

Megatrend digitalisation and information technology ETFs:

Megatrend: cybersecurity

Of course, society’s increasing reliance on the internet simultaneously increases the threat of potentially devastating cyber-attacks by hackers. IT security has become big business as attacks have become more widespread, sophisticated and damaging. Increasing awareness of these risks and the real harm they can do means we can safely assume that cybersecurity companies will be in demand for the foreseeable future. 

Megatrend cybersecurity ETFs:

Megatrend: global infrastructure development

Rapid urbanisation and global population growth create huge opportunities for companies involved in the construction and maintenance of infrastructure. According to UN forecasts, more than two-thirds of the world's population will live in urban areas by 2050. That figure was less than 50% in the year 2000. As 2 billion more people move to the cities, the need to develop sustainable infrastructure that can cope with the scale of change will become paramount. 

There are some ETFs that follow the megatrend Global Infrastructure Development.


Megatrend: water

Rising populations, income levels and industrialisation naturally increase the demand for clean water. Ally that with unequal distribution of water resources and growing pressure on our existing reserves from climate change, contamination and overuse and you have the water megatrend.  

Megatrend water ETFs:

Megatrend: diversity and equality

The disparity in opportunity between the genders, otherwise known as the gender gap, continues to diminish as women increasingly make their mark in the upper echelons of political, social and commercial institutions. One encouraging indicator is that the gender gap is considered closed in education and health, according to a study by the World Economic Forum. Greater awareness and support for the integration of minority groups has even resulted in investments that enable you to express your views on this trend. 

Megatrend diversity and equality ETFs:

Megatrends may not give you the edge

While megatrends are having a huge impact on the world, some financial theorists are critical of the idea that you can successfully use this information to boost your returns. There have been studies that show it is very difficult to identify which industries will succeed in advance. Be aware that if you tilt your portfolio towards particular sectors then you may not be rewarded for the risk in the long run and there’s no guarantee you will outperform a more diversified, passive investment strategy.

If you would still like to invest in megatrends then here’s a list of the Megatrend ETFs in our ETF database plus a summary of the largest players in the table below.


Top 10 Biggest Megatrend ETFs

Name Currency Fund size in millions TER (%) 1-year-return (%) Dividends
iShares Automation & Robotics UCITS ETF USD 1965 0.40 -2.49 Accumulating
L&G ROBO Global Robotics and Automation UCITS ETF USD 1038 0.80 -0.85 Accumulating
L&G Cyber Security UCITS ETF USD 629 0.75 23.52 Accumulating
Lyxor World Water UCITS ETF D-EUR EUR 515 0.60 -3.03 Distributing
Xtrackers MSCI World Information Technology Index UCITS ETF 1C USD 497 0.30 20.51 Accumulating
iShares Global Water UCITS ETF USD 480 0.65 1.61 Distributing
iShares Digitalisation UCITS ETF USD 420 0.40 11.96 Accumulating
iShares Healthcare Innovation UCITS ETF USD 355 0.40 17.73 Accumulating
iShares Ageing Population UCITS ETF USD 218 0.40 3.64 Accumulating
iShares Automation & Robotics UCITS ETF USD 55 0.40 - Distributing
Source: justETF Research; as of 11/10/2018