Partner Insight: 5 questions for our SmartCity portfolio manager

Ivo Weinöhrl, Senior Investment Manager for Pictet’s SmartCity strategy, explains how the powerful urbanisation trend is creating compelling investment opportunities.

What constitutes a “smart city”?

In a nutshell, a smart city improves the quality of life of its citizens and ensures that the ongoing urbanisation trend is sustainable. It does so by having the capacity to collect, aggregate and analyse the data generated by our increasingly technological and connected world, and then applying those insights to our day to day lives to solve the challenges human activity generates.

Why is this theme relevant to investors?

In order to manage rapidly growing populations, cities around the world will have to adapt to protect human wellbeing and reduce our environmental impact. For this to happen, we will have to make them more intelligent. These challenges will generate an abundance of investment opportunities across a broad range of sectors. Companies active in mobility and transportation, infrastructure, real estate, sustainable resource management or services catering to urban lifestyles, all have a role to play in supporting this transformation.

And why are “smart cities” the future? Isn’t extensive (and expensive) infrastructure already in place to support cities around the world?

Two words: demographic development. The world population is growing at a rapid pace, and at the same time people are moving to cities to enhance their opportunities or due to changing lifestyles. The momentum is especially powerful in the developing world, where we will see urbanisation rates converge towards those in the developed world over the next 30 years. Traditional infrastructure will simply become insufficient to support this influx of people. Citigroup estimates that investments of USD 2.1tn annually will be needed by 2030 to transition 4 billion human beings to sustainable cities and communities.

 

Where will the funding come from? Aren’t a lot of governments around the world heavily indebted?

Yes, they are, but at the same time, they face significant pressure to act on several fronts. On the one hand, the Sustainable Development Goals set out by the UN in 2015 aim to tackle some of our biggest challenges by 2030, and Goal #11 deals specifically with ensuring cities are inclusive, safe, resilient and sustainable. This will be driving the global policy agenda, and investments, over the coming decade. At the same time people around the world are increasingly demanding better quality of life for themselves and their children – from the air they breathe to access to more efficient healthcare. But given the lack of excess cash on public balance sheets, a large portion of “smart city” investments will have to come from public-private partnerships or directly from the private sector. And this is already happening. We have a great example in New York City, where the transformation of disused phone boxes into a city-wide network of super-fast, free Wi-Fi kiosks, was funded by selling advertisement on screens placed above the kiosks.

How do you translate such a theme into investments?

We see three promising segments of investments for the theme –

  • Building the city: companies involved in the design, planning and construction of tomorrow’s cities, with a focus on efficiency and sustainability.
  • Running the city: companies that provide traditional, but essential infrastructure like water supply and waste management, digital infrastructure like 5G communication or payment networks, and new, more efficient mobility solutions;
  • Living in the city: companies that offer services and solutions for 21st century urban living, including housing, working and recreational activities.

All three of these categories harbour innovative business models whose growth and success will be powered by population expansion and the overarching goal of improving people’s quality of life.

Disclosures

This marketing material is issued by Pictet Asset Management (Europe) S.A.. It is neither directed to, nor intended for distribution or use by, any person or entity who is a citizen or resident of, or domiciled or located in, any locality, state, country or jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. Only the latest version of the fund’s prospectus, KIID (Key Investor Information Document), regulations, annual and semi-annual reports may be relied upon as the basis for investment decisions. These documents are available on assetmanagement.pictet or at Pictet Asset Management (Europe) S.A., 15, avenue J. F. Kennedy, L-1855 Luxembourg.

The information and data presented in this document are not to be considered as an offer or solicitation to buy, sell or subscribe to any securities or financial instruments.

Information, opinions and estimates contained in this document reflect a judgment at the original date of publication and are subject to change without notice. Pictet Asset Management (Europe) S.A. has not taken any steps to ensure that the securities referred to in this document are suitable for any particular investor and this document is not to be relied upon in substitution for the exercise of independent judgment. Tax treatment depends on the individual circumstances of each investor and may be subject to change in the future. Before making any investment decision, investors are recommended to ascertain if this investment is suitable for them in light of their financial knowledge and experience, investment goals and financial situation, or to obtain specific advice from an industry professional.

The value and income of any of the securities or financial instruments mentioned in this document may fall as well as rise and, as a consequence, investors may receive back less than originally invested. Risk factors are listed in the fund’s prospectus and are not intended to be reproduced in full in this document.

Past performance is not a guarantee or a reliable indicator of future performance. Performance data does not include the commissions and fees charged at the time of subscribing for or redeeming shares. This marketing material is not intended to be a substitute for the fund’s full documentation or any information which investors should obtain from their financial intermediaries acting in relation to their investment in the fund or funds mentioned in this document.

This document is a marketing communication issued by Pictet Asset Management and is not in scope for any MiFID II/MiFIR requirements specifically related to investment research. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any products or services offered or distributed by Pictet Asset Management.

 

This article was a paid posting by Pictet Asset Management all views and/or opinions are those of the sponsor and not of Investment Europe.

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