Beyond the Horizon: Themes for Intergenerational Clients
Generational themes identify long-term trends that will impact markets and livelihoods over a generation. These themes affect how we invest and how we work with clients. They are particularly crucial to our intergenerational clients and our private capital program, where long-term patient capital can outperform more liquid investment options. While our capital markets forecast looks at the medium term (three to seven years), our generational themes look beyond that, offering areas of interest and focus 15 years or more.
- Decarbonization as an intergenerational investment opportunity
- Machine Learning and Artificial Intelligence as a potential Third Industrial Revolution
- A Biotech Revolution moving from potential to kinetic energy
- Explosive Growth continuing in the Sun Belt
Decarbonization is the process of taking traditional carbon-based processes and either replacing them with non-carbon-based processes or capturing and mitigating the carbon in existing processes. When it comes to decarbonization, several sub-themes exist with potential to disrupt and impact a generation of companies: reimagined mobility; renewable and clean energy; clean hydrogen and new fuels; and nuclear fusion. Though decarbonization has been a politically sensitive area of investing, the opportunity for investment in decarbonization over the next generation is in the trillions, perhaps even tens of trillions, irrespective of politics.
Machine Learning and Artificial Intelligence
Machine learning and artificial intelligence are two related concepts that often merge. Machine learning is the ability for machines to learn from available data. With the advent of big data, machines that can improve their information analyses have led to some rapid economic advances. Artificial intelligence is a broader category, generally defined as the pursuit of machines developing the qualities of the human mind. Some of these qualities include language and pattern recognition and solving complex problems. Together, machine learning and artificial intelligence have the potential to harken a third industrial revolution that will transform our economy over the next generation.
A Biotech Revolution
The third wave of a long-standing biotech/medical revolution began a generation ago as efforts from the human genome project, advances in computing (see Machine Learning), and scientific breakthroughs combined to create what some have called the dawning of a new Golden Age of Medicine. This Golden Age of Medicine may offer a revolution in healthcare, pharmaceuticals, and biotech. Pundits have pointed to several trends to support this theory, such as the so-called “Moore’s Law for Medicine,” where the speed of discovery builds on itself and quickens, or “the biological century,” where innovations in medicine shift from a trial and error method in the past to an engineering science with predictable/scalable outcomes in the present and future. We saw this play out on a global scale in 2020, when, thanks to computing technology, the mRNA vaccines for COVID-19 were miraculous in their delivery mechanism, development speed, and emergency approvals. As the pandemic has shown, new diseases can emerge and spread rapidly, increasing the stakes and the potential role for government funding and public-private partnerships to speed drug discovery and delivery. Diseases such as cancer and Alzheimer’s are coming into the target range for solutions to transform the developed world’s life expectancy and quality of life.
Explosive Growth in the Sun Belt
In the largest economy in the world, people are moving to the Sun Belt in droves, bringing their spending, businesses, education, and ideas. For example, three dozen people, net, move to Atlanta every day, double that in Nashville and nearly three times that to Jacksonville. Phoenix has about 200 net new residents per day. A mind-boggling average of 8,300 people per day, net, have moved into Texas over the last decade, attracted primarily to the large urban areas. This trend shows little to no sign of abating; with in-migration, high taxes in coastal capitals, and expanding transportation and cultural options in the Sun Belt, we believe it will continue to expand at or above the rate of growth over the last decade.
Though generational themes do not change our core approach in private capital, where we look to allocate across vintages and managers to large areas that can absorb meaningful capital, they do play out in several ways in our current and evolving investment platform. They represent areas we are watching with particular attention as we craft portfolios to clients’ specific needs. These themes are not exhaustive, and though some will fade, and others will emerge, we are particularly interested in overweighting these areas as we look for private investment opportunities.
Balentine has proven its ability to balance strong investment performance in the long-term with client asset protection in the near term. We rely on science first and foremost to allow for unemotional decision-making in liquid markets. We are also able to move tactically when unexpected opportunities, such as the coronavirus pandemic, present themselves. Finally, we take an intergenerational view of macro themes that slowly but forever change the world in which we live. By blending these tested approaches together, we enable our clients to meet their goals with consistency through time.
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