Have you ever thought of the impact of increases in life expectancy and shifting trends in consumerism on the global economy? We have.
The Canada Pension Plan Investment Board launched a new investment group called Thematic Investing that identifies major structural changes, emerging trends, innovations and disruptive technologies that are bound to reshape the world in the future, and then incorporates them into our investment strategy. Thematic investing is a new approach to investing that has the potential to deliver better performance over the long-term.
The thematic investing approach includes holding explicit views of the future and investing in corresponding assets to position CPPIB to capitalize on exciting long-term trends that could include driverless cars, clean energy technologies or increases in life expectancy, to help keep the CPP Fund on solid financial footing well into the future for its nearly 19 million contributors and beneficiaries. In the current year, our Thematic Investing team has initiated research on two themes related to demographics and has made its first investments.
Our thematic investing team’s investment process begins with in-depth, top-down analysis to identify important structural growth drivers in the economy. Once a major driver is identified, we look for associated investment themes, and then for ways to invest based on what we expect will happen in the future of those themes as they are set to evolve and affect security prices significantly over many years. These could take the form of investments in industries, sectors or companies which are expected to do well as themes played out. We started by investing in public markets, where positions are more scalable but invest across asset classes.
Underlying this strategy is a focus on long-term investing and identifying segments of the economy where growth potential had been ignored or underappreciated. Many investors look at factors such as demographics, but few do research that looks far into the future. Our focus therefore is on multi-generational factors and incorporates a very long term timeframe – a quarter century rather than a quarter.
More information on our investment strategy can be found in our 2015 Annual Report.