Asia continues to lag other regions for integrating ESG principles with investing; better data and stronger regulatory requirements will help institutional investors, market observers say.
ôGlobal opportunities have been expanding at both ends of the economic spectrum,ö says Adam Schor, Denver-based client portfolio manager and vice-president at Janus. ôIn emerging countries, there has been the dramatic growth of the Bric (Brazil, Russia, India and China) economies. In developed countries, the number of rich people continues to escalate. Both of these trends create excellent options for international investment.ö
The five global themes identified by Janus are infrastructure, agriculture, lifestyle spending, wealth management, and commercial real estate.
Based in Denver, Janus manages around $206.7 billion in assets for more than four million individual and institutional clients worldwide. Outside the US, it has offices in London, Tokyo, Hong Kong, Singapore, Melbourne and Milan.
Infrastructure is an investment theme thatÆs becoming a consensus choice among many investors.
The growing need for electricity, particularly in the developing world, will create increasing demand for transmission and distribution equipment, Schor notes. Projections for global electricity consumption continue to rise among both Organisation for Economic Co-Operation and Development (OECD) and non-OECD countries. According to the Energy Information Administration, global energy consumption will double from a 2003 base of around 15 billion kilowatt hours (kwh) to 30 billion kwh by 2030, an annual growth rate of 2.6%.
Janus has also identified opportunities from the privatisation of infrastructure assets such as toll roads, tunnels, bridges, mass transit systems, airports, and media such as cable television and utilities.
Demand for agriculture, meanwhile, is increasingly associated with wealth generation. As people become more prosperous, both the quality and quantity of food they consume increases, Schor notes.
Meat consumption is set to grow at a much faster rate than the population and since the worldÆs arable land is limited, the key to increasing food production, is agricultural science, Schor says. Genetically modified crops will allow the production of more food as well as crops for the future mass production of ethanol and biodiesel. Makers of fertilizer, such as potash, also stand to benefit as they develop products to increase crop yields.
Demand for housing is also expected to rise in several markets worldwide, despite the slump in the US, Schor says. Home building in Mexico is expected to surge, for example, with government support that funds over 58% of new mortgages in Mexico. In India, the relatively undeveloped home financing sector is likely to see robust growth for many years. Other markets where mortgage penetration is low are Italy, Hungary and the Czech Republic.
Janus believes Macau is a market that is potentially well-placed to capitalise on the growing consumer wealth in Asia. The firm estimates that three times as many people will visit Macau as Las Vegas in 2009-2010, but the former Portuguese colony will have less than 15% the number of hotel rooms as its American desert counterpart. Companies holding existing gaming concessions and licenses therefore have a sustainable competitive advantage, Janus notes.
The wealth management industry is another beneficiary of the growing riches in Asia. Janus believes the most successful advisors will offer full private banking services backed by an international reputation, such as is the case with major Swiss private banks. They are able to provide dedicated financial advisors who offer a multitude of services over and above investment vehicles, including tax and estate planning, real estate or art brokerage, and business and social connections, Schor says.
Commercial real estate, which is driven by global economic expansion, is also appealing to Janus because it represents hard assets with predictable cash flows. These include real estate investment trusts, real estate operating companies and real estate brokerages and services companies.
Despite recent weakness in global real estate valuations, Janus believes there will be increasing opportunities to capitalise on the maturing of global commercial real estate as an asset class due to the forecasted growth in the publicly listed markets and the growing allocation of investment capital to the sector.
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